CNG for commercialization of small volumes of …documents.worldbank.org/.../pdf/104200-V2-WP-CNG... · CNG for commercialization of small volumes of associated gas Prepared by TRACTEBEL

CNG for commercialization of small volumes of associated gas

Prepared by TRACTEBEL ENGINEERING S.A.

October 2015

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1

TABLE OF CONTENTS

EXECUTIVE SUMMARY .......................................................................................................... 5

Introduction ............................................................................................................ 5

The CNG Chain ......................................................................................................... 5

Production ........................................................................................................... 5

Transportation ..................................................................................................... 6

Examples of CNG chain costs ................................................................................ 7

CNG market overview ............................................................................................. 9

Conclusions ........................................................................................................... 10

1. INTRODUCTION ............................................................................................................ 11

1.1. Abbreviations .............................................................................................. 11

1.2. Constraints for the recovery of associated gas as CNG .............................. 15

1.2.1. Nature of associated gas ......................................................................... 15

1.2.2. Constraints linked to CNG transportation .................................................. 16

1.2.3. Gas quality ............................................................................................. 17

1.2.4. Recovered gas pressure at the production site .......................................... 17

1.2.5. Stored gas temperature ........................................................................... 17

1.2.6. Production rate ....................................................................................... 18

1.2.7. Offloading Rate ....................................................................................... 18

1.2.8. Offloading conditions ............................................................................... 18

1.2.9. Safety ................................................................................................ 18

1.2.10. CNG ship certification .............................................................................. 19

1.2.11. Container design for marine transport ...................................................... 19

1.2.12. Onshore CNG transportation .................................................................... 20

2. STATUS OF CNG TECHNOLOGIES – MARINE CNG ............................................................ 20

2.1. Compressed Energy Technology AS ............................................................ 21

2.1.1. Technology ............................................................................................. 22

2.1.2. Marine transport vessels .......................................................................... 22

2.1.3. Certification ............................................................................................ 26

2.1.4. Key features and Comparison LNG ........................................................... 26

2.1.5. Commercial References ........................................................................... 27

2.1.6. Targeted Markets .................................................................................... 27

2.1.7. Potential Application for 1-15 MMscf/d Gas Production .............................. 27

2.2. EnerSea – VOTRANSTM ................................................................................ 27

2.2.1. Technology ............................................................................................. 27

2



2.2.4. Certification ............................................................................................ 33

2.2.5. Commercial references ............................................................................ 33



2.3. Sea NG COSELLETM ...................................................................................... 34

2.3.1. Technology ............................................................................................. 34



2.3.4. Certification ............................................................................................ 38




2.4. TransCanada CNG Technologies ................................................................. 39

2.4.1. Technology ............................................................................................. 39



2.4.4. Certification ............................................................................................ 41




2.5. Knutsen OAS Shipping AS ........................................................................... 43

2.5.1. Technology ............................................................................................. 43



2.5.4. Certification ............................................................................................ 46




2.6. Trans Ocean Gas ......................................................................................... 47

2.6.1. Technology ............................................................................................. 47



2.6.4. Certification ............................................................................................ 51




2.7. Marine CNG – Comparison of technologies ................................................ 52

2.8. Elements of Costs........................................................................................ 54

3

2.8.1. CNG transportation costs ......................................................................... 54

2.8.2. Gas treatment costs ................................................................................ 56

2.9. Conclusions for marine CNG ....................................................................... 57

3. STATUS OF CNG TECHNOLOGIES – ON-SHORE CNG ...................................................... 57

3.1. Background ................................................................................................. 57

3.2. Road bulk CNG transportation .................................................................... 59

3.2.1. Steel tube trailers .................................................................................... 59

3.2.2. GTM Type III cylinders module ................................................................ 59

3.2.3. Lincoln TITANTM 4 composite cylinders ..................................................... 60

3.2.4. Galileo Virtual Pipeline® ........................................................................... 60

3.2.5. Comparison of CNG transport and storage containers ................................ 62


3.2.7. Elements of Cost ..................................................................................... 63

3.3. Conclusions for on-shore CNG .................................................................... 68

4. ALTERNATIVE SYSTEMS FOR NATURAL GAS TRANSPORTATION ..................................... 69

4.1. Transport as natural gas hydrates (NGH) ................................................... 69

4.2. Pressurized LNG (PLNG) ............................................................................. 69

4.3. Adsorbed natural gas (ANG) ....................................................................... 70

5. CNG MARKET IN USA ..................................................................................................... 72

5.1. CNG as fuel for vehicles .............................................................................. 72

5.2. Flaring gas utilization experiences ............................................................. 77

5.3. CNG as fuel for vessels................................................................................ 78

6. CNG MARKET IN CHINA ................................................................................................. 79

7. CNG MARKET IN PAKISTAN ............................................................................................ 82

8. APPLICATIONS FOR OTHER COUNTRIES ......................................................................... 86

8.1. Opportunities for small scale CNG .............................................................. 86

8.2. Nigeria ......................................................................................................... 87

8.2.1. CNG as fuel for power generation ............................................................ 87

8.2.2. Small scale power generation for isolated industries .................................. 88

8.2.3. CNG as fuel for transport ......................................................................... 88

8.2.4. Natural Gas from Marginal fields .............................................................. 89

4

8.3. Iraq ............................................................................................................. 90


8.3.2. CNG as fuel for transportation .................................................................. 91

8.3.3. CNG as fuel for industries ........................................................................ 91

8.3.4. CNG as fuel for military sector .................................................................. 92

8.4. Indonesia .................................................................................................... 92


8.4.2. CNG as fuel for transportation .................................................................. 94

8.4.3. Experience of Jakarta .............................................................................. 95

8.4.4. CNG as fuel for industrial sector ............................................................... 95

9. POTENTIAL BARRIERS AND INCENTIVES ........................................................................ 96

10. CONCLUSIONS .............................................................................................................. 96

11. REFERENCES ................................................................................................................. 97

5

EXECUTIVE SUMMARY

The study has analysed current Compressed Natural Gas (CNG) technology for its

potential to monetise small volumes of this gas (1-15MMscf/d) and avoid or reduce

the gas flaring.

Introduction

Compressed Natural Gas (CNG) is natural gas transported and stored in compressed

form (pressurised to between 100 and 250 barg) in order to reduce the volume to be

transported or stored by between 150 to 300 times that of gas at atmospheric

pressure.

Historically, CNG has been used onshore for gas supply over short distances and in

relatively small volumes. While the cost of delivered CNG depends on project

specific conditions such as gas volume, in general CNG can be economically viable

for volumes up to around 5 MMscf/d and distances up to 800 km.

Compressed Natural Gas (CNG) is mainly used as an alternative fuel for vehicles.

Natural gas vehicles are very popular worldwide, particularly in countries such

Pakistan, Argentina, India and China. Use of CNG as fuel for road vehicles has been

driven by two main factors: rising gasoline prices and increased environmental

concerns.

Use of CNG at a larger scale is not yet commercially viable but is being investigated

by several companies as a potential economically viable alternative to Liquefied

Natural Gas (LNG).

The CNG Chain

The CNG chain is composed of four elements: Production, Transportation,

Receiving and Storage.

Production

CNG production consists of gas pre-treatment and compression. The pre-treatment

process is simpler than in an LNG liquefaction plant and is generally set by the

requirements of the end users. The main pre-treatment activities are:

Removal of heavy hydrocarbons to avoid condensation when storing as CNG,

removal of contaminates: hydrogen sulphide, carbon dioxide, etc., and

dehydration.

The amount of compression required depends on the delivery pressure of the source

gas reservoir and gas quality.

6

Transportation

CNG may be transported on-shore or off-shore (marine). There are a number of

different options available for each alternative.

Marine CNG Transportation

Transportation cost is the most important factor in the CNG chain. The cost of CNG

marine transport is directly proportional to the volume of gas and distance between

the gas source and the consumers.

Since the early 1960’s the marine transport of CNG has been investigated and

analysed by various developers. The current marine CNG developers and their

transportation concepts are as follows:

On-shore CNG Transportation

On-shore CNG transportation is a proven technology that has been used for decades.

The on-shore CNG transportation system consists of:

gas compression and truck loading at the gas source location;

truck offloading, heating, let-down and metering at the customer site.

Analysis of the cost of delivered CNG for a number of volumes and distances (see

below) shows that, for production capacities higher than 5 MMscf/d, delivery of

CNG by truck becomes difficult not only due to the substantial number of vehicles

required (especially for longer distances), but also the significant extent of loading

and offloading facilities required.

The CNG storage type used for transportation is the main difference between the

various suppliers. The main characteristics are as follows:

CETech EnerSea VotransTM

Sea NG Corporation

CoselleTM

TransCanada CNG

Technologies

Knutsen OAS

Shipping

Trans Ocean Gas

Type of Containment

Composite or X80 pipe steel

; composite (Iso

container)

X80 steel cylinders

coiled X70 line pipe forming a

carrousel (Coselle)

Composite reinforced steel Gas Transport Modules (GTM)

X80 steel cargo tank cylinders

(CTC)

Composite HDPE and fibreglass cylinders (MEGC)

Development status

concept stage advanced concept

stage

advanced concept stage

concept stage concept stage

Concept stage for MEGC

container only

Transport capacity (MMscf)

85-319 (+ 60 to 120,000 m³oil)

200 – 1,200

variable (container)

75 – 1,000 (ship)

10-100 (barge)

51 - 531 (ship)

?-80 (barge)

12 - 100

70 - 1,200 Variable as a function of

the number of containers

7

Examples of CNG chain costs

The sizing and cost of the different elements of the chain depend on the specific

characteristics of each project such as: gas volume and composition, distance to

consumers, storage and infrastructure requirements, geographical location etc.

The unit cost (capital and operating) for four scenarios have been evaluated: Gas

volumes of 3 and 10 MMscf/d, and short and long distances to customers. It must be

noted that these cost estimates are only indicative as specific circumstances (e.g. a

challenging physical environment, high labour costs in an overheated business

environment such as the Bakken in N. Dakota), can affect the costs and hence

economics significantly.

Tube type Luxfer-GTM type III Lincoln type IV Galileo MAT

Container material Steel – High strength steel

Aluminum inner wall wrapped with carbon fiberglass

Carbon fibre/epoxy composite

ISO 9809 steel cylinder

Trailer max capacity (MMscf)

up to 0.29 up to 0.44 up to 0.36 up to 0.25

Pressure (barg) 187-227 248 250 200-250

Corrosion resistance - ? ++ -

Gas/container weight ratio (t/t)

0.24 0.41 0.79 0.2

Comparative cost base case ++ ++ +

Transport

method

Item Marine 3 MMscf/d / 550-800 MN Marine 10 MMscf/d / 550-800 MN

Gas treatment 0.42 0.21

Compression/loading 0.73 0.70

Transport 6.43 5.22

Delivery 0.50 0.50

Total 8.08 6.63

Item Truck 3 MMscf/d / 750-1000 Mi Truck 10 MMscf/d / 750-1000 Mi



Transport 8.81 8.79

Delivery 0.50 0.50

Total 10.46 10.20

Long distance

Off

sho

re

Capital & Operating cost, USD2015/MMBTU

On

sho

re


8

Transport

method

Item Marine 3 MMscf/d / 55-150 MN Marine 10 MMscf/d / 55-150 MN



Transport 3.00 2.40

Delivery 0.50 0.50

Total 4.65 3.81

Item Truck 3 MMscf/d / 0-250 Mi Truck 10 MMscf/d / 0-250 Mi



Transport 2.20 2.20

Delivery 0.50 0.50

Total 3.85 3.61

Off

sho

re


On

sho

re


Short distance

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

Truck 3 MMscf/d / 750-1000 Mi

Truck 10 MMscf/d /750-1000 Mi

USD

2015

/MM

BTU

Long distance, Onshore

Gas treatment Compression/loading

Transport Delivery

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

Truck 3 MMscf/d / 0-250 Mi

Truck 10 MMscf/d /0-250 Mi

USD

2015

/MM

BTU

Short distance, Onshore


Transport Delivery

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

Marine 3 MMscf/d /550-800 MN


USD

2015

/MM

BTU

Long distance, Offshore


Transport Delivery

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0



USD

2015

/MM

BTU

Short distance, Offshore


Transport Delivery

9

The above cost estimate examples can be summarized as follows:

CNG market overview

Onshore

There are currently almost 20 million road vehicles in the world in a wide range of

countries using CNG as fuel. The ten countries with the largest CNG vehicle fleets

(in millions) are:

The fast growth of CNG as fuel for vehicles has been to a large extent driven by

government subsidies and initiatives to promote conversion to CNG for

environmental and economic reasons.

Other uses of CNG, such as for power generation; industrial consumers etc., are

currently less developed mainly because the gas volumes required are often too high

for truck distribution.

Offshore

The lack of proven commercial options for marine transportation of CNG is the

main obstacle to faster business development in these areas.

Indonesia may become the first-mover in marine transportation of CNG. A 2,200m³

CNG carrier is currently being built to supply gas to a CNG storage facility in

Lombok. The project is planned to start commercial operations in 2016.

0.01.02.03.04.05.06.07.08.09.0

0 200 400 600 800

US

D/M

MB

TU

Nautical miles

CNG: Offshore transport

3 MMSCFD 10 MMSCFD

0.01.02.03.04.05.06.07.08.09.0

10.011.0

0 200 400 600 800 1000

US

D/M

MB

TU

Miles

CNG: Onshore transport

3 MMSCFD 10 MMSCFD

Rank Country Registered fleet Rank Country Registered fleet

1 Iran 3.50 6 India 1.50

2 Pakistan 2.79 7 Italy 0.82

3 Argentina 2.28 8 Colombia 0.46

4 Brazil 1.75 9 Uzbekistan 0.45

5 China 1.58 10 Thailand 0.42

World total = 18.09 million vehicles

10

Conclusions

CNG on-shore transportation is well established in a number of countries since the

1990s. Marine CNG transportation, however, is still under development and with no

units yet in commercial operation.

While the cost of delivered CNG depends on project specific conditions such as gas

volume and composition, in general:

On-shore delivered CNG can be economically viable for volumes up to

around 5 MMscf/d and distances up to around 500 miles (800 km).

Marine CNG is not yet commercially proven but could be economically

viable for large volumes and distances up to around 2000 nautical miles.

11

1. INTRODUCTION

Pressurising Natural Gas and sending it into pipeline network systems is the major

means of transporting natural gas, especially for onshore purposes. Long distances

pipelines together with compressor stations distributed along the pipeline route

transport the gas from the producing area to consumers.

However, Compressed Natural Gas (CNG) used as an alternative fuel for vehicle is

now popular worldwide and the twenty-first century has seen an important growth in

onshore bulk transportation and infrastructure for delivery and distribution of natural

gas at vehicle refuelling stations.

At the same time, several marine CNG transport technologies have been developed

for short-distance transportation of small volumes of gas competing with less

economical LNG solutions. However, despite marine CNG transportation options

being promising, no project has yet been put into commercial operation.

This is expected to change in the coming years, influenced by emerging energy

demand in countries with less developed infrastructure and with the growing

sensitivity towards environmental impact of higher emission fuels.

Indeed, the development of economical CNG transportation could be part of the

possible solutions for the recovery of associated gas as mentioned in the Global Gas

Flaring Reduction (GGFR) program led by the World Bank.

The following sections focus on CNG solutions applicable for use with small

volumes (1-15 MMscf/d) of associated gas in offshore and onshore conditions.

Before investigating the status of development by the various technology providers

and their proposed technologies, it might be useful to first describe the issues linked

to the handling and recovery of associated gas for the purpose of transporting it as

CNG.

1.1. Abbreviations

ABS American Bureau of Shipping

AG Associated Gas

AIP Awarded Approval in Principle

ANG Adsorbed Natural Gas

APCNGI Association Perusahaan CNG Indonesia

APL Advanced production loading

ASME American Society of Mechanical

Engineers

12

ATB Articulated tug-barge

barg Gauge Pressure (bar)

Btu British thermal unit

BV Bureau Veritas

C Celsius

CDM Clean Development Mechanism

CETech Compressed Energy Technology

CNG Compressed Natural Gas

CO2 Carbon dioxide

CTC Cargo Tank Cylinder

DNV Det Norske Veritas

DOT U.S. Department of Transportation

dwt Dead weight tons

EYB Energy Year Book

FPSO Floating Production Storage and

Offloading

FPU Floating Production Unit

FRP Fiber Reinforced Plastic

FSRU Floating Storage Regasification Unit

GDP Gross Domestic Product

GGFR Global Gas Flaring Reduction

GPSS™ Gas Production Storage and Shuttle

GTM Gas Transport Module

H2S Hydrogen sulphide

HDIP Hydrocarbon Development Institute of

Pakistan

HDPE High Density Polyethylene

IGC International Gas Code

13

IMO International Maritime Organization

IPL Island Power Limited

kg Kilogram

KRG Kurdistan Regional Development

LASG Lagos State Government

LNG Liquefied Natural Gas

LPG Liquefied petroleum gas

LPP Length between perpendiculars

m Meters

MEGC Multi-Element Gas Container

MFS Mobile Fuel Solution

mg miligram

Mi Miles

MJ Mega Joule

mm Milimeters

MN Nautical Mile

MMscf/d Million standard cubic feet per day

MOU Memorandum of Understanding

MW Mega Watt

NDRC National Development and Reform

Commission

NGC North Gas Company

NGH Natural Gas Hydrates

NGL Natural Gas Liquid

NGV Natural Gas Vehicle

NGVA Natural Bio Gas Vehicle

NOC North Oil Company

14

OSG Overseas Shipholding Group

PG&E Pacific Gas and Electric Co.

PLN

(PGN)

Perusahaan Listrik Negara

PLNG Pressurized Liquefied Natural Gas

PNG Pressurized Natural Gas

ppmv Parts per million per volume

PPP Public Private Partnership

PRP Pressure Regulating Plant

PUF Polyurethane foam

QRA Quantified Risk Assesment

SPDC Shell Petroleum Development Company

STL Submerged Turret Loading

t/h Ton per hour

TCI TransCNG International

TDG Transport of Dangerous Goods

TOG Trans Ocean Gas

TPED Transportable Pressure Equipment

Directive

UN United Nations

VOTRANS Volume Optimized Transport and Storage

System

15

1.2. Constraints for the recovery of associated gas as CNG

1.2.1. Nature of associated gas

Associated gas is a form of natural gas which is found in association with oil within

the reservoir and is produced when oil arrives at the surface. Once separated from

crude oil, raw natural gas usually consists of a mixture of hydrocarbons in various

proportions, principally ethane, propane, butane, pentanes and small quantities of

heavier components.

In addition, raw natural gas contains water vapour, carbon dioxide (CO2), helium,

nitrogen, sometimes hydrogen sulphide (H2S), and other compounds. Typical

compositions of associated gas are given as an example in Table 1 but each field and

sometimes even each well has its own production characteristics and gas

composition.

Component Lean

Gas

Rich

Gas

Methane 92.32 81.62

Ethane 3.25 8.17

Propane 1.80 4.49

i-Butane 0.43 1.44

n-Butane 0.62 1.54

i-Pentane 0.00 0.28

n-Pentane 0.00 0.45

Hexane 0.00 0.11

C7+ 0.00 0.09

Helium 0.00 0.01

Nitrogen 0.69 0.94

Carbon dioxide 0.89 0.86

total 100.00 100.00

Molecular

weight

17.78 20.62

Table 1 – Typical associated gas composition

http://www.2b1stconsulting.com/natural-gas/

16

There are different ways to deal with the production of associated gas. Depending on

the quantities involved, the field location (at sea, on land, remote or not…), and the

composition of the gas (e.g. some may contain a large proportion of carbon dioxide

or nitrogen), the gas can be just flared off, re-injected into the reservoir for enhanced

oil recovery, used as fuel gas on the platform for electricity generation or exported

by pipeline for further processing or direct injection into gas grids.

Unfortunately, today associated gas is flared rather than used in many countries and

contributes to climate change.

Whatever the destination (except if flared), the gas must be treated and conditioned

accordingly. This is also the case for its transportation as CNG due to the fact that

the intent is to recover the gas to burn elsewhere, generally after being injected into

a gas pipeline.

1.2.2. Constraints linked to CNG transportation

For economic reasons, CNG transportation especially marine CNG must maximize

the ratio of the weight of the transported gas to the weight of the containment. This

implies that the gas should ideally be transported athigh pressure and low

temperature. Usually, transport pressures range between 100 and 250 barg giving a

volumetric efficiency (reduction of the volume occupied by the gas at atmospheric

conditions) of 150 to 300:1 compared to LNG (about 600:1). Some technologies

also cool the gas to -30oC.

The amount of gas that can be loaded, equipment required and operating procedures

depend on several parameters:

the gas composition,

the pressure and temperature conditions at the field,

the production rate of associated gas and thus the filling rate of the marine or

land transport container,

the type of CNG container,

the gas storage conditions (pressure and temperature).

At the point of delivery, equipment required and operating procedures will depend

on:

the pressure and temperature conditions for CNG offloading,

the possible limitation of the offloading rate,

the required quality specification for the received gas.

All these parameters are relevant for CNG solutions at onshore or offshore gas fields

but the issues are particularly important in case of marine CNG transportation for

which approval is required by a Certification Society such as Det Norske Veritas

(DNV).

17

1.2.3. Gas quality

As previously mentioned, associated gas is present in various compositions that may

require the gas to be treated before being stored under pressure for transportation.

Normally the gas must be dried so that no moisture will form in the container which

may cause formation of hydrates and corrosion in the presence of carbon dioxide.

Hydrogen sulphide is not allowed for reasons of corrosion. Furthermore, at the

reception point, the gas will generally have to meet pipeline quality specifications

with restrictions on injection temperature, water and hydrocarbon dew points,

sulphur content and Wobbe index.

Depending on the composition and on the gas utilisation, the extent of gas

conditioning required prior to transportation as CNG will be a combination of

several different processes such as:

removal of heavy hydrocarbons to avoid condensation when storing CNG,

removal of contaminates: hydrogen sulphide, carbon dioxide…,

dehydration.

Typical contaminant concentrations in associated or stranded well gas are:

water vapour: 1 – 3% (gas is saturated)

H2S: 0 – 300 ppm

CO2: 0.1 – 10%

Condensable hydrocarbons: 1 – 1000 ppmv

For onshore gas pipelines, the requirements for the content of contaminants typically

are:

water dew point: -10°C at 70 barg

hydrocarbon dew point: -2°C at 1-70 barg

H2S: maximum 5 mg/m³

total sulphur: max. 30 -50 mg/m³

CO2 2-3 % (molar)

These requirements could be more severe depending on the loading conditions and

the gas containment material.

1.2.4. Recovered gas pressure at the production site

Separation of the oil, water and gas produced in their original phases is achieved by

a stepwise reduction in pressure (usually one to three separation stages) down to

nearly atmospheric pressure, flashing off the gas. Associated gas is produced at all

pressure levels and additional compression equipment may be required to reach the

required transport pressure..

1.2.5. Stored gas temperature

The mass of gas stored is a function of the density of the gas. Gas can be carried

under chilled conditions but this requires appropriate conditioning equipment and

insulation to avoid over-pressurization of the containment during transportation.

18

Also, one must take into account the unavoidable warm-up during the loading itself

resulting from the compression of the gas into the containment especially if the latter

is insulated. For example, lean gas compressed to 250 barg would increase in

temperature by 40-50°C. This issue should be carefully addressed when developing

the operating conditions at the loading point.

The depressurization of the cargo at the delivery point will have the opposite effect

i.e. cooling, and this should also be taken into consideration when defining the

offloading conditions.

1.2.6. Production rate

Oil production is generally continuous and therefore also the production of

associated gas. It is generally not acceptable to interrupt the oil production and

therefore CNG offtake facilities must be able to support continuous operation at the

field or well gas production rate. However, the volume of gas produced is not

constant and will also decline overtime. This has a direct impact on the solution to

be put in place.

In this report, the production rates considered are:

minimum 1 MMscf/d corresponding to a hourly mass flowrate of around 1 t/h of

associated gas (Lean Gas of Table 1),

maximum 15 MMscf/d corresponding to a hourly mass flowrate of around 14 t/h

of associated gas (Lean Gas of Table 1).

1.2.7. Offloading Rate

As for the production rate, the offloading rate may be limited by the end user and

may be required to be continuous. This has a direct impact on the offloading

facilities and ship immobilization time (marine CNG) or CNG storage (onshore

CNG) hence on the whole delivery chain.

1.2.8. Offloading conditions

Most of the time, the transported gas will be injected into a pipeline connected either

to a single customer (e.g. a power plant) or to an existing natural gas grid which are

operated within certain pressure and temperature ranges. This will require heating

facilities to prevent gas temperatures being too low due to the Joule-Thompson

cooling when depressurizing the CNG. A scavenging compressor would need to be

provided as, at some point during the gas offloading, the CNG pressure will be

insufficient to deliver the gas at the rate and pressure required by the receiving

pipeline. It will also maximise CNG recovery and reduce the heel pressure, the

residual pressure in the transport vessel.

1.2.9. Safety

Transporting large quantities of gas under high pressure raises three major safety

issues:

19

Integrity of the containment system: the stored energy of compressed gas is very

high. For instance, a 30m tall 24” diameter pipe pressurized at 110 barg contains

the energy equivalent of 120 MJ. Damage from a rupture can result from shock

waves, flying projectile fragments from the ruptured piping, and unrestrained

movement of piping and equipment propelled by the escaping gas,

Integrity of the carrier’s hull: the tremendous weight of the containment system

results in the transfer of the loads from the CNG containment to the support

structure, and so must be checked for suitability. It must also be verified that the

support of the containment system can sustain the loads from the ship movement

in difficult sea conditions or potential collisions. Furthermore, the impact of an

accidental leak of the containment system must be fully assessed and the risks

mitigated by adequate safety measures being implemented throughout the

lifetime of the transport unit. This requires the possibility to inspect the

containment system at regular intervals or to provide a continuous monitoring

system,

Risk of explosion: The nature of the containment system, which often consists of

side-by-side assemblies of cylinders, may create a confined space in the ship’s

holds in which a gas leakage (not necessarily from the cylinders but from the

manifolds) may create an explosive atmosphere. (N.B.: DNV’s rules require the

hold space to be inerted with nitrogen or other suitable non corrosive medium).

1.2.10. CNG ship certification

The development in the early 2000’s of marine CNG alternatives to LNG led the

classification societies to develop guidelines for both the containment systems and

CNG carriers. New design criteria and acceptance procedures have been proposed to

depart from the conventional pressure vessel codes and International Gas Code

(IGC) which previously made such CNG concepts uneconomic and even practically

unfeasible.

The current existing codes and standards are:

American Bureau of Shipping (ABS): Guide for Vessels Intended to Carry CNG

in Bulk,

Det Norske Veritas (DNV): Rules for Classification of Ships – part 5 CNG

Carriers,

Bureau Veritas (BV): Rule Note NR 517 – Classification of CNGCarriers.

Any marine CNG transport design must be approved by one of the classification

societies.

1.2.11. Container design for marine transport

The cargo containment system, especially the cargo cylinders (individual pressure

vessels for storage of CNG) must be proven safe and reliable through the whole

range of process and mechanical stress conditions, including:

low temperatures which may occur in case of sudden depressurization including

the impact on the ship hull (impingement of gas cooled by the Joule-Thompson

effect),

high and low temperatures resulting respectively from the gas compression and

the gas depressurization,

fatigue induced by the pressure-cycling in the loading and offloading process,

20

external loads (deadweight, acceleration forces due to ship’s or truck’s

movement),

stress corrosion cracking,

…

Governing codes applicable for high pressure gas cylinders can be conventional

codes like ASME VIII div1 but several approaches have been taken to optimize the

design namely to make more efficient use of material and reduce the weight of the

cylinders.

ASME VIII div2 was revised in 2007 in order to promote more competitive design

and div3, originally developed for design pressures above 10,000 psi (690 bar), in

2010 incorporated composite wrapped vessels for CNG.

DNV proposes to design the cylinders using its Standard for Submarine Pipeline

Systems OS-F101 which, for the X-80 standard pipeline steel, allows a 50%

reduction in wall thickness of the gas cylinders as compared to the IGC.

Four types of cargo tanks are differentiated in the ABS’s guidelines:

Type 1 metallic cylinders with nominal diameter 200 mm (8 ”) or less,

Type 2 metallic cylinders with nominal diameter above 200 mm (8 ”),

Type 3 cylinders constructed from composite materials,

Type 4 cylinders constructed with an inside metal liner and wrapped outside with

high strength steel wires.

This classification corresponds the current designs proposed by all the marine

transportation CNG developers.

1.2.12. Onshore CNG transportation

Safety of CNG land transport is mainly concerned by the risk off collision hence by

the integrity and resistance of the containment system.

Transportation of pressurized gases by road is not new and is well regulated all over

the world e.g. Transportable Pressure Equipment Directive (TPED) in Europe, U.S.

Department of Transportation (DOT), the Hazardous Substance Act in Thailand, the

Canadian TDG Regulations (transport of dangerous goods)… including size and

weight restrictions for vehicules.

2. STATUS OF CNG TECHNOLOGIES – MARINE CNG

The concept of marine CNG transport has a long story. A first attempt at

transporting natural gas under compressed form for commercial purposes was made

in the 1960’s by Columbia Gas Company of Ohio. The attempt failed mainly

because the weight of the gas containment designed at that time according to

International Maritime Organization (IMO) code occupied too large a portion of the

loading capacity of the vessel. Since then, with the use of advanced pressure vessels

codes and sometimes non metallic materials (composite), several design have been

proposed in order to make marine CNG transportation commercially viable.

21

Figure 1 Columbia Gas - Ocean Transport Pressure Vessel

Many papers have been published and presented at conferences on the subject. They

are referenced in appendix 1. Also information found on the website of the

technology providers has been used for this report. In particular, the Canadian

Centre for Marine CNG Inc. has, since its establishment in 2003, been an active

promoter of large-scale marine transportation of CNG by providing technical

support and testing facilities to companies involved in the development of CNG

technology for offshore transport of natural gas. The current partners in the Centre

include CNG technology providers, shipping companies, classification societies,

natural gas infrastructure providers, offshore technology providers, petroleum

producers, universities, research organizations and the governments of

Newfoundland and Nova Scotia.

The following descriptions reflect the current status of the various technologies

presently in the market together with considerations regarding their applicability to

handle small volumes of associated gas in offshore conditions.

The current proposed concepts for CNG shipping are:

Compressed Energy Technology AS (CETech),

EnerSea-VOTRANSTM (Volume Optimized Transport and Storage System),

Sea NG Corporation – Coselle,

Trans Canada CNG technologies,

Knutsen,

Transocean.

2.1. Compressed Energy Technology AS

Compressed Energy Technology (CETech) is a company jointly established in 2004

by Leif Höegh & Co, Statoil and Teekay Shipping. Since June 2009, CETech has

been a 100% owned subsidiary of Höegh LNG AS.

22

2.1.1. Technology

CETech's CNG containment system consists of cylinders built of composite

material. The cylinder is now in the process of qualification testing in order to

develop fabrication methodology and determine material selection.

Figure 2 Sub-scale cylinder testing (Courtesy of CETech)

2.1.2. Marine transport vessels

CETech has developed two major concepts:

the CNG Shuttle that is intended to transport either natural gas from a supply

location to a receiving terminal pipeline, or to transport associated gas from an

oil producing unit to a receiving/processing terminal,

the Shuttle Producer which can transport both oil and compressed gas and is

aimed at fields which require simultaneous production and offtake of oil and

associated gas.

The basic idea in the CNG ship design is to separate the CNG storage system from

the vessel’s hull, the latter being similar to standard oil tankers.

2.1.2.1. THE CNG SHUTTLE

The design could take two different configurations:

1) design using a vertical cylinder containment arrangement

23

Figure 3 Courtesy of CETech

The gas is stored at 150 barg in cylinders of 3 m diameter and 30 m length. The

cylinders are installed vertically in the ship in a supporting frame. No insulation of

the containment system is required due to storage at ambient temperatures.

The stored gas weight per cylinder at operating pressure is 29,000 kg for the lean gas

composition given in Table 1, and 37,500 kg for the rich gas composition. Higher

loading capacities can be achieved by using low storage temperatures (down to

minus 30°C), the cylinders having a design temperature of minus 60°C. However, an

operating procedure is not available and the energy of compression could

compromise achieving such low temperatures. Should it be possible, then insulation

would be required to maintain the gas in its initial storage conditions during the

ships voyage.

No transportation capacity has been communicated by CETech. If we assumed the

cylinders were to be installed in standard oil tankers, 250 to 500 MMscf could be

transported.

Therefore the maximum daily production of associated gas considered in this study

could be stored in just 10 cylinders which would represent a small portion of the

total ship storage capacity.


24

The ship is provided with a cargo compartment that contains a heating system for

use during gas offloading and also has a small gas processing unit that may be

required by the gas conditions at the loading location. In that respect, liquids that are

separated from the gas can be stored in dedicated tanks or, says CETech, “be spiked

into the tanks together with the gas”.It is not clear how the liquid would be

recovered at the delivery side.

2) Design using a horizontal pipe system


This CNG containment system consists of stacked layers of 200 m long horizontal

pipes mounted within and on the ship’s deck. The pipes, made of high strength X-80

steel, are 1.2 m diameter with a wall thickness of about 36 mm.

The proposed ship would contain a total of 510 pipes with a total volume of about

120,000 m³. The gas will be stored at a high pressure of 250 barg which gives a ship

transport capacity in the range of 30 to 35 million standard cubic metres (1,000 to

1,200 MMscf).

CETech claims to have been looking at CNG Shuttles with horizontal pipe system

having gas transportation capacities of 300 to 1,200 MMscf to be considered when

compared with the maximum production rate of 15 MMscf/ d for this study.

The ship can be equipped with processing facilities so that it can accommodate gas

from a production platform or directly from seabed facilities via a connecting buoy.

At destination, both alternatives may be contemplated (jetty or buoy).

2.1.2.2. THE SHUTTLE PRODUCER

The concept is a very versatile solution aimed at collecting simultaneous production

and off-take of oil and gas in several configurations, the objective being floating

production units with a minimum of process equipment onboard. It could be

applicable for:

transport of un-stabilized crude oil to an onshore processing plant,

intermittent or continuous production and storage of oil and gas depending on the

reservoir characteristics,

stationary at well with offshore transfer service,

connection to a production platform, or directly to seabed facilities via a

connecting buoy.

25

Figure 6 Floating Production Storage and Offloading (FPSO) with offloading to dedicated shuttle

tankers (Courtesy of CETech)

The Shuttle Producer will use the hull of conventional oil tankers with horizontal

gas pipes as previously described mounted above the oil tanks. The design considers

two sizes of vessels:

1) one based on Aframax vessels

The ship would be able to carry 60 to 70,000 m³ of oil and 8,000 m³ of gas.

Assuming a pipe length of about 145 m for a Aframax with a length of 245 m

(length between perpendiculars (LPP)) and a breadth of 44 m, 48 pipes would be

required to achieve a volume capacity of 8,000 m³ giving a transportation capacity

of around 80-85 MMscf at 250 barg.

2) one based on Suezmax vessels

The ship would be able to carry 120,000 m³ of oil and 30,000 m³ of gas.

Assuming a pipe length of about 200 m for a Suezmax with a length of 285 m (LPP)

and a breadth of 48 m, 130 pipes would be required to achieve a volume capacity of

30,000 m³ giving a transportation capacity of around 300-320 MMscf at 250 barg.

2.1.2.3. CONTAINERIZED SOLUTION

In addition to the development of marine CNG carriers, CETech has entered into a

cooperation agreement with Hexagon Lincoln (Lincoln, Nebraska, USA), a wholly

owned subsidiary of Hexagon Composites (Ålesund, Norway),for the utilization of

their TITAN compressed natural gas modules to serve as mobile pipelines for

marine CNG applications.

According to Hexagon Lincoln, the design of the TITAN gas cylinder is based upon

Lincoln Composites' TUFFSHELL® technology. It has a high density polyethylene

(HDPE) liner, a filament wound carbon fibre/epoxy composite shell (the primary

structural member of the container), plus a polyurethane coating applied to the outer

surface. The composite cylinders weigh 75 percent less than equivalent steel tubes.

The TITANTM4 Module is a 40 ft ISO 1496 certified shipping container which

contains four TITAN cylinders. Each cylinder is almost 12 m in length and over 1 m

in diameter and is designed to operate at 250 barg. In these conditions, one module

can contain 7 to 8,000 kg of CNG or about 0.36 MMscf with a module tare weight

of 15,649 kg.

http://www.lincolncomposites.com/

26

Therefore 3 to 42 TITANTM4 Modules could respectively store the daily associated

gas production range of this study namely 1 to 15 MMscf.

CETech has presented the conversion of an existing vessel using seven blocks of 21

containers each for a total transportation capacity of about 50 MMscf at 250 barg.

This containerized solution would enable more or less tailor-made conversions of

available ships into ship-containers. However we would expect that such a

configuration would require a very dense piping and valves system.

Figure 7 TITAN 4 Module and proposed ship conversion (Courtesy of CETech)

2.1.3. Certification

CETech’s CNG Shuttle concept has received Approval in Principle from

classification society DNV.

The ISO container module is ABS approved for onshore and marine CNG

transportation.

2.1.4. Key features and Comparison LNG

A summary of the CETech CNG systems is given below compared with the same

volume of LNG expressed as energy content (btu/btu).

For the cargo/containment weight ratio, only the weight of the gas container is

considered without piping, valves and supporting frame.

Type CNG system CNG Capacity

(MMscf)

Cargo/Container

weight ratio

(ton/ton)

Energy ratio

LNG/CNG

(btu/btu)

CNG Shuttle (V) Vertical

composite

cylinders –

154 barg

200-500 0.70 3.3

CNG Shuttle (H) Horizontal X80

pipes – 250 barg

and oil tanks

300-1,200 0.24

2

Shuttle Producer

(Aframax)

Horizontal X80

pipes – 250 barg

and oil tanks

85

(& 70,000 m³ oil)

0.24 2

Shuttle Producer Horizontal X80 319 0.24 2

27

(Suezmax) pipes – 250 barg

and oil tanks

(&120,000 m³ oil)

Container-vessel TITANTM 4

modules

Composite

cylinders –

250 barg

Assumed to be

variable

0.79 (0.52

incl’module)

2

Table 2: A summary of the CETech CNG systems

2.1.5. Commercial References

None.

2.1.6. Targeted Markets

CETech considers that CNG is expected to be profitable within a transport range of

300 (production volume 18,000 MMscf/y) to 2,000 nautical miles (production

volume of 100,000 MMscf/ y).

2.1.7. Potential Application for 1-15 MMscf/d Gas Production

Considering the range of possibilities proposed by CETech, a tailor-made CNG

chain could be developed to fit demand either with the Aframax type Shuttle

Producer or with the container vessel using TITAN 4 modules depending on the

characteristics of the oil reservoir.

2.2. EnerSea – VOTRANSTM

EnerSea Transport LLC is a company founded in 2001 in partnership with, among

others, the shipping company Kawasaki Kisen Kaisha Ltd (“K” Line) and the ship

builder Hyundai Heavy Industries Co. (HHI). The company has developed a CNG

marine transport system named VOTRANSTM

2.2.1. Technology

VOTRANSTM technology intends to address several issues relating to the transport

of gas under high pressure i.e.:

1) by optimizing the gas cargo/containment weight ratio,

2) by avoiding pressure transient conditions when loading the gas,

3) by minimizing the heel pressure so increasing the net CNG transport capacity.

28

2.2.1.1. GAS CARGO/CONTAINMENT WEIGHT RATIO

For a non-perfect gas, the pressure, volume and temperature are related by the

expression PV = zRT, where R is a constant and z is the compressibility factor.

Depending on the gas composition, the VOTRANSTM system is designed to operate

at or near the minimum compressibility factor Z for the gas. One may observe on the

figure below that, for a given gas temperature, the Z factor reaches a minimum for

an associated pressure which tends to decrease with temperature.

Figure 8 Z compressibility factor as function of pressure at constant temperature

(Courtesy of EnerSea)

A temperature/pressure pairing can be chosen so that the mass of CNG is maximized

with respect to the weight of the containment, the latter being proportional to the

stored gas pressure.

With the VOTRANSTM system, the gas is compressed and cooled prior to being

loaded into the ship containment system. EnerSea mentions that typical stored

conditions can be 125 barg and -30°C.

The benefit of this compared to other systems operating at higher pressures and

ambient temperatures is to reduce the containment cost by using a lower storage

pressure (more or less half the pressure), thereby allowing thinner walled cylinders,

while keeping a relatively high gas transportation capacity.

2.2.1.2. DISPLACEMENT FLUID

EnerSea uses a patented liquid displacement system to handle the gas during loading

and offloading operations. EnerSea’s CNG cargo containment system consists of

several sets of storage cylinders configured into multiple tanks and tiers (two or

more tanks configured to load and offload together).

29

Figure 9 VOTRANS CNG Tank Module (Courtesy EnerSea)

After compression and chilling, the gas flows into the ship containment system

against a pressurized ethylene glycol/water solution. Gas loading proceeds

progressively from one module of cylinders to the next, so cascading the

glycol/water solution ahead of it. When all the modules are filled with gas, the

glycol solution is stored in an insulated dedicated tank onboard the ship. The

required inventory for the ethlyne glycol/water solution is 8-10% of the total

containment system capacity.

At the delivery side, the same method is applied in reverse by pushing the gas out

with the pumped glycol solution. The VOTRANSTM system has several advantages:

the gas handling is performed in constant conditions avoiding the transient

situations that require gas conditioning and close control during operations. The

gas can be maintained in dense phase all through the loading and unloading

operations,

according to EnerSea, the system with gas kept in a dense phase can

accommodate a wide range of gas compositions, including rich and associated

gas,

gas offloading rate is easily controlled by the glycol/water pumps that may

deliver high rates if required,

the displacement fluid piston prevents gas auto-cooling in the cylinders during

offloading, again allowing high offloading rates,

low cost for liquid pumping compared with the higher Opex of a scavenging gas

compression system needed for CNG offloading using a blowdown method.

2.2.1.3. HEEL PRESSURE

The use of a displacement fluid allows for lower residual gas volumes (2-5%),

against 10-15% for conventional high pressure blowdown systems.

30


2.2.2.1. CNG VESSEL

The engineering program, concluded with “K” Line and HHI, has resulted in the

design and general specification of a vessel targeted to carry 700 MMscf of lean gas.

The vessel is a 75,000 m³ compressed natural gas carrier. The design utilizes vertical

cylinders with all manifold connections at the top of the tanks. The cargo

containment consists of one hundred cylinder modules, each comprised twenty-four

1,100 mm diameter cylinders with a length of about 39 m (cylindrical part). The

cylinders are constructed from API 5L X80 grade carbon steel and have a 19mm

wall thickness for the 125 barg design pressure. The modules are grouped in twelve

separate holds which are inerted with nitrogen to enhance safety.

The interior of the cargo spaces is insulated by polyurethane foam (PUF) in order to

maintain the low temperature of the stored gas and avoid over-pressurization of the

cylinders due to heat ingress. The tank modules sit upon a denser layer of foam

material that can support their weight.

The cargo handling system is located forward of the cargo block. Internal submerged

turret loading/offloading has been incorporated into the design so that the process

handling system is well away from the accommodation block. The concept can

accommodate loading/unloading at jetty or buoy systems as well as uninterrupted

loading or delivery.

By optimizing the pressure/temperature combination for the two gas compositions

given as example in §1.1, the VOTRANSTM V800 class vessel would have a gas

transport capacity as follows:

Table 3: VOTRANSTM V800 gas transport capacity

Lean Gas Rich Gas

Total gas containment

volume (m³)

75,000 75,000

Stored gas temperature (°C) -30 -15

Stored gas pressure (barg) 124 110

Stored gas density (kg/m³) 206 219

Total gas cargo (MMscf) 725 665

31

Figure 10 V-800 VOTRANSTM CNG Ship General Arrangement (Courtesy EnerSea)

EnerSea has developed a range of vessel size classes, including the V600 and V1000

for smaller and larger transport needs respectively, in order to offer a wider option

range adaptable to specific project requirements. A horizontal pipe configuration

could also be contemplated.

Figure 11 V-800 VOTRANSTM CNG Ship (Courtesy EnerSea)

Figure 12 CNG Barge 25-75 MMscf and 75-225 MMscf vessel (horizontal pipe configuration)

(Courtesy EnerSea)

32

2.2.2.2. BARGE CONCEPT

EnerSea’s CNG barge system, using the same VOTRANS™ technology, provides

solutions for gas delivery needs in the range of <10 MMscf/d to over 100 MMscf/d

over transit distances ranging from 50 to 75 miles.

The barge-based system can employ an articulated tug-barge design (ATB), wherein

the tug is coupled directly to the barge. The ATB will provide for better speed,

efficiency and maneuverability in the open seas than towed barges, which results in

a low-cost service.

2.2.2.3. GAS PRODUCTION STORAGE AND SHUTTLE

Additionally, EnerSea claim that its technology can be used for gas production and

transport using its Gas Production Storage and Shuttle (GPSS™) system. The

GPSS™ eliminates a separate Floating Production Unit (FPU) and long pipelines in

any type of environment, including remote, deepwater and arctic areas. The GPSS™

system consists of a fleet of CNG ships, each having raw gas production and gas

handling facilities onboard to condition the water-saturated produced fluids,

including gas/water separation. The gas is then compressed (if required), chilled and

stored in gas containment holds, while the extracted water is treated and discharged.

Any natural gas liquids (NGLs) are stored as un-stabilized liquid in pressure vessels

similar to those designed for CNG.

Figure 13 Gas Production Storage and Shuttle (GPSS™) system

(Courtesy EnerSea)

33


A summary of the contemplated VOTRANSTM CNG systems are given below

compared with the same volume of LNG expressed as energy content (btu/btu).

The cargo/containment weight ratio is only given for the V800 vessel class as the

other versions are still only in the planning stage; only the weight of the gas

container is considered without piping, valves and supporting frame.


(MMscf)

Cargo/Container

weight ratio

(ton/ton)

Energy ratio

LNG/CNG

(btu/btu)

Barge Horizontal pipe

arrangement

<10-100 - -

(unknown) Horizontal pipe

arrangement

75-225 - -

V600 Vertical X80

cylinders –

125 barg

600 - -

V800 Vertical X80

cylinders –

125 barg

800 0.35-0.39 2.1

V1000 Vertical X80

cylinders –

125 barg

1,000 - -

Table 4: VOTRANSTM CNG systems


ABS granted ‘Approval in Principle’ for the design and operating plans for the V-

800 VOTRANS™ ship in 2003.

ABS has confirmed that EnerSea’s CNG barge design is within the Approval in

Principle certification that was granted to EnerSea’s VOTRANS™ CNG ship

system.

2.2.5. Commercial references

None.


The figure below illustrates the expected economic rate/range relationship for the

current VOTRANS™ fleet of gas carriers.

One may see that the VOTRANS system targets to support production rates of

between 150 and 700 MMscf/d (54,000 to 255,000 MMscf/y) depending on distance

that ranges between 250 and 3,000 nautical miles.

However the development of system on barges and smaller ship design (horizontal

pipes) would allow covering coasting trade and smaller yearly production rates.

34

Figure 14 Range of expected commercial transport service for the VOTRANS™ fleet (Courtesy

EnerSea)

The VOTRANS™ barge would be competitive between 50 and 750 nautical miles.


Considering the number and size, VOTRANSTM CNG systems can be scaled to fit

demand and would depend on daily production rates from the reservoirs.

The barge system could be more appropriate for the small production range

considered in this report, provided that the production platform is equipped with gas

treatment and compression facilities.

The GPSS™ system contemplated by EnerSea, appears to specifically target

gas/condensate reservoirs (non-associated gas) and not gas associated with oil

production.

2.3. Sea NG COSELLETM

Sea NG Corporation is a Canadian company engaged in the development and

commercialization of technology for marine transportation of CNG. Sea NG has

formed an alliance with Marubeni Corporation, Teekay Corporation and Enbridge

Inc. to jointly develop marine CNG projects, (Sea NG Alliance). The Sea NG

Alliance will finance, build and own ships utilizing the Coselle™ technology.

2.3.1. Technology

Sea NG was formed in 2005 to acquire the rights to an innovative marine CNG

technology -- the Coselle™ invented by Cran & Stenning. The Coselle™ is a large-

volume, high-pressure gas storage module. Coselle™ is a contraction of the words

“coiled pipe in a carousel”.

35

The central idea behind the Coselle™ concept is to create a large CNG storage

system that overcomes the issues resulting from the utilization of large diameter

pressure cylinders or pipe sections namely:

the severe strength requirements for a CNG cargo container design that must

meet the following limit states (ABS technical paper) : bursting, local buckling

and collapse, fracture, fatigue, out-of-roundness and corrosion. This is all more

challenging with large diameter containers,

Marine CNG containment requires fabrication and installation ofa large number

of pressure vessels that could create upward pressure on manufacturing costs and

production delays,

the large number of pressure vessels to be manifolded together makes the system

complex with numerous valves, connecting pipes, flanges and fittings which are

potential sources of leakage,

configuration of the pressurized gas containment must accommodate regular

inspections requiring access to each of the components.

In that respect, the Coselle™ system appears to respond to all the aforementioned

issues. Its innovative design consists of a large coil of pipe wound into a cylindrical

storage container. Up to ten miles of conventional six-inch, ¼” wall, high-strength

X70 line-pipe is coiled into a reel-like structure, called a carousel. The carousel

provides support and protection for the transportation and stacking of Coselles™.

Inspection can easily be performed with an intelligent pig device.

The size of a Coselle™ ranges from 15 to 20 metres in diameter and 2.5 to 4.5

metres in height and can weigh 550 tonnes. A single Coselle™ carries about 3.0

MMscf of natural gas, depending on Coselle™ dimensions, and gas temperature,

pressure and composition. By design, fewer Coselles™ are required for a given

transportation capacity hence reducing the complexity of the manifolds.

For the Lean Gas composition given in §1.1, a loaded capacity of 2.7 MMscf can be

achieved with 213 barg (3,087 psig) and 25°C but 4.3 MMscf if the pressure is

increased to 266 barg (3,860 psig).

Figure 15 Coselle™ Cross Section (courtesy of Sea NG)


Coselle™ CNG carriers are essentially bulk carriers with Coselles™ installed in

their holds. Sea NG developed the standard Coselle™ CNG carrier around a double-

hulled 60,000-dwt Panamax bulk carrier. In this design, Coselles™ are carried in

stacks of six high within the ship’s holds.

36

Figure 16 (courtesy of Sea NG)

In total there are 18 stacks of Coselles™ and 108 Coselles™ per ship. Each

Coselle™ holding 3.0 MMscf of CNG, the ship’s transportation capacity is

323 MMscf.

For safety the holds are inerted with nitrogen in order to eliminate the danger of fire

below the deck. All valves and fittings are installed above deck to facilitate

servicing.

Figure 17 The Coselle™ CNG Ship (courtesy of Sea NG)

37

The CoselleTM ship may be subject to multiple design variations for different project

applications. The table below gives an idea of the possible ship characteristics. It is

noteworthy that the announced net gas capacities are related to load pressures of

275 barg.

Figure 18 Sea NG Ship Fleet (Courtesy of Sea NG)

For smaller volume and/or distance projects, it would be possible to mount the

Coselles™ onto a barge. An articulated tug barge unit was designed by Sea NG that

carries 80 MMscf of gas in 28 Coselles™, stacked two high on deck.

Figure 19 Coselle™ tug barge (Courtesy of Sea NG)

38


A summary of the Coselle™ C16 and C108 class ship are given below compared

with the same volume of LNG expressed as energy content (btu/btu).


considered without piping, valves and supporting frame, keeping in mind that the

Coselle™ ship contains fewer valves and fittings and thus the gas cargo/total

deadweight ratio could actually be better. The gas cargo is calculated for the Lean

gas composition given in §1.1 with loaded pressure and temperature of respectively

266 barg and 25°C.


(MMscf)

Cargo/Container

weight ratio

(ton/ton)

Energy ratio

LNG/CNG

(btu/btu)

Coselle™ C16 6inch coils – 16

Coselle™

51 0.12 1.9

Coselle™ C108 6inch coils – 108

Coselle™

344 0.18 1.9

Table 5: Coselle™ C16 and C108 class ship


The Coselle™ design and prototype was fully approved by ABS and DNV at an

operating pressure of 275 barg (4000 psi).

ABS granted ‘Approval in Principle’ for the design and operating plans for the C16

Coselle™ ship in 2009.


None.


Sea NG says that the Coselle™ CNG technology has the potential to be the least

cost gas-delivery system when the market is less than 2,500 miles from the gas

source. Sea NG adds that CNG is potentially significantly less costly (combined

tariff capex+opex) than LNG or pipelines when the transport distance is between

300 and 1 500 miles.

The production range, based on Sea NG available information, should be between

20,000 and 120,000 MMscf/ydepending on the distance.


The lower limit of the production range corresponds to a daily production of

65 MMscf.

On that basis, time to fill a Coselle™ C16 class ship would range between 65 and 4

days as a function of the production rate. The long immobilization period for the

ship could adversely impact the project economics.

39

2.4. TransCanada CNG Technologies

TransCanada CNG Technologies Ltd is a subsidiary of TransCanada Corporation

Overseas which is a natural gas pipelines operator and power producer in Canada. In

2006, TransCanada entered into a strategic partnership with Overseas Shipholding

Group, Inc. (OSG) to commercialize new technology for CNG transportation.

Under the agreement, OSG would own and operate a new type of vessel, capable of

moving large quantities of CNG. The ships would utilize TransCanada's patented

technology for the design, construction and operation of Gas Transport Modules

(GTMs) for the storage of the CNG.

The partners worked under their joint venture TransCNG International (TCI). The

present status of this joint venture, as well as TransCanada’s continued interest in

marine CNG, is not clear. A press article (TradeWinds Oct2010) mentioned that

TransCanada had the intention to sell its CNG transport system, including the

company’s license to build its patented composite reinforced pressure vessel for

marine use. Nothing has been publicly revealed about anyactions taken after that

decision. Nevertheless, a description of the technology is given below as the GTM

module may present some advantages.

2.4.1. Technology

TransCanada's technology is entirely based on the utilization of a proprietary

composite reinforced steel pressure container system manufactured under license

from NCF Industries Inc.

The Gas Transport Module (GTM) is a steel welded pressure vessel wrapped

circumferentially on its exterior surface with composite layer reinforcement. The

patented manufacturing process is made in such a way that the composite

reinforcement produces lower hoop stresses in the steel shell at operating pressures.

Typically, according to NCF, the composite reinforcement adds 20% to the weight

of the vessel while increasing the pressure capability by 100%. AGTM module has

40% less weight per volume compared to steel built to the same standards.

Figure 20 (Courtesy TransCanada)

40

TransCanada awarded a manufacturing license to the Floating Pipeline Company

which developed the GTM modules. The GTM module has been designed in 24 or

30 meters length with a diameter of 1 meter (40 ’’) and a service pressure of

206 barg (3,000 psi). Each has a storage capacity of 0.2 MMscf of natural gas.


TransCanada's concept was initially intended to be used for small ships or barges

with a cargo capacity range from 35 to 100 MMscf;TransCanada also claim to have

developed in-house models that would envisage vessels carrying between 500 and

8,000 GTMs representing a gas transportation capacity between 100 and

1,600 MMscf.

The figure below partially shows how the 24 m GTMs are placed longitudinally in

the vessel’s holds and manifolded together.

Figure 21 CNG Ship mounted modules (Courtesy TransCanada)

In the shallow-draught carrier (left-hand) picture below, the GTM modules appears

to have been assembled in six stacked layers each comprising ten elements. The

overall dimensions of such assembly of modules would be of approximately 25 (l) x

15 (w) x 9(h) meters. The cargo content of one assembly would be of 12 MMscf.

41

Figure 22 Shallow-draught carrier Barge concept (Courtesy TransCanada)

The barge as drawn on the above (righthand) picture appears to contain two

assemblies of 6x6 GTM modules which correspond to a cargo transportation

capacity of two times 7 MMscf.


A summary of TransCanada GTM system is given below compared with the same



considered without piping, valves and supporting frame. The gas cargo is calculated

for the Lean gas composition given in §1.1 with loaded pressure and temperature of

respectively 207 barg and 25°C. Calculation is also made for a Tug/Barge design

with the same loading conditions.


(MMscf)

Cargo/Container

weight ratio

(ton/ton)

Energy ratio

LNG/CNG

(btu/btu)

Tug/Barge 2x36 composite

reinforced steel

GTMs

14 1.5 2.4

Shallow-draught

carrier class’60’

60 composite

reinforced steel

GTMs

12 1.5 2.4

Ship class 100 500 composite

reinforced steel

GTMs

98 1.5 2.4

Table 6: TransCanada GTM system


TransCanada received Approval in Principle for ocean going vessels from Lloyds

Register in 2003. The cylinders or Gas Transport Modules (GTMs), developed by

NCF, which would contain the gas, have already been fully approved.

Conditional approval for inland barge use has been received from ABS.


None.

42


TransCanada has made a first assessment using the ‘rule of thumb’ graph below to

determine if CNG could provide a reasonable transport solution. One can see that

the targeted market is for low volumes (<200 MMscf/d) and short distances (<500

nautical mile).

Figure 23 (Courtesy TransCanada)


The considered associated gas production is within the range targeted by

TransCanada, provided the distance between the gas source and the delivery location

remains below 500 nautical miles.

The proposed solution would be a tug/barge system with possible various tug/barge

combinations and sizes depending on the specification of the project.

However, the GTM concept as a whole only addresses one important facet of the

problem (the storage and transport). The gas conditioning, loading and offloading

issues are set aside and assumed to be handled by the producer and the customer

respectively. No gas handling facilities are provided on the tug/barge system as

shown below on the typical process schematic.

Figure 24 Typical process schematic (Courtesy TransCanada)

43

2.5. Knutsen OAS Shipping AS

Knutsen OAS Shipping AS has developed its CNG system with the assistance of the

ship classification society DNV and the steel pipe manufacturer Europipe GmBH.

‘PNG®’ for Pressurized Natural Gas, is Knutsen OAS Shipping's registered Trade

Mark for their CNG concept.

2.5.1. Technology

The main principle on which the concept was developed is to apply high pressure

gas pipeline standards to the design of CNG cylinders.More specifically apply the

DNV standard, DNV-OS-F101- Submarine Pipeline Systems which is in line with

the evolution of the construction codes for very high pressure vessels.

Firstly, a risk based approach (QRA) according to IMO code MSC 72/16 is used to

address the cargo containment hazards of the Knutsen PNG ship.

The acceptance criteria for the development of PNG® cylinders were in accordance

with the following DNV standard requirements:

proper selection of the pipe material (for the PNG®, grade X80 line pipe);

application of failure mode analysis considering burst and fatigue design criteria;

full scale testing such as fatigue tests, burst test, cooldown, verification, crack

propagation analysis due to cooldown or cold spots resulting from an accidental

gas leak…this to be undertaken on the basis of Probabilistic Limit State Design

Criteria.

Observance of these design principles has enabled the PNG® concept to reduce the

steel weight by 50% from what would have been required by the IGC.

The main characteristics of the PNG® Cargo Tank Cylinder (CTC) are illustrated

below.

Figure 25 PNG® Containment System (Courtesy Knutsen OAS Shipping AS)

44


Knutsen OAS Shipping has developed two different types of vessel:

an offshore loading and discharging type PNG® vessel,

a terminal-to-terminal type PNG® vessel.

The PNG® ship is a combination of an ordinary crude oil tanker and a CNG

container ship.

The offshore loading type vessel can apply a submerged turret loading (STL) system

from advanced production and loading (APL) systems for gas, while other types of

offshore loading systems may also be considered. Area is allocated on the ship for

such facilities, together with space for process facilities that either could be used for

gas processing or compression.

The figure below shows the cargo tank cylinders arrangement on-board the Knutsen

standard type offshore loading vessel. The vessel contains 2,672 PNG® cylinders of

36 m height giving a total cargo capacity of about 800 MMscf for the Lean gas

composition given in §1.1 and a pressure of 250 barg.

Figure 26 CTC arrangement on-board the vessel (Courtesy Knutsen OAS Shipping AS)

45

Figure 27 Type of PNG® vessels (Courtesy Knutsen OAS Shipping AS)

Knutsen OAS Shipping has developed a generic design applicable to several vessel

sizes from small PNG® carriers with gas carrying capacity down to 70 MMscf to

large PNG carriers with carrying capacity more than 1,200 MMscf.

Figure 28 Small PNG vessel type (Courtesy Knutsen OAS Shipping AS)

46


A summary of the Knutsen OAS Shipping PNG® system is given below compared

with the same volume of LNG expressed as energy content (btu/btu).




respectively 250 barg and 25°C. Two vessels type are considered: the standard type

offshore loading vessel with 2,762 PNG® cylinders and for the smaller type

assuming 660 PNG cylinders of 13 m height. Type CNG system CNG Capacity

(MMscf)

Cargo/Container

weight ratio

(ton/ton)

Energy ratio

LNG/CNG

(btu/btu)

Offshore

Loading PNG®

2,762 vertically

mounted X80

cylinders

794 0.21 2

Small ship type 660 vertically

mounted X80

cylinders

70 0.21 2

Table 7: Knutsen OAS Shipping PNG®


All the full-scale tests required by DNV for the containment system qualification

have been successfully completed and approval in principle was granted for the

design and fabrication methods of the cylinders.

Formal Approval has been given by DNV to EUROPIPE that they are qualified as

supplier for the PNG cylinders according to the DNV Class Rules for Compressed

Natural Gas Carriers.


None.


Figure 29 PNG® versus pipeline and LNG -2010 (Courtesy Knutsen OAS Shipping AS)

47

According to Knutsen OAS Shipping, the above figure shows how the PNG®

technology could be economically viable for certain volumes and distances in the

market compared with LNG or pipeline. The PNG® system falls between pipeline

and LNG and would be much more attractive for smaller volumes over relatively

long distances. The volumes and distances considered are respectively 150-

500 MMscf/d and 100-3,000 nautical miles.

In that respect, Knutsen proposes several possibilities using their PNG system with,

as examples, a FPSO equipped with gas/LPG (liquefied petroleum gas) mix storage

and a CNG chain of terminal-to-terminal type vessel for evacuation of the produced

gas and transportation to the customer(s).

Figure 30 (Courtesy Knutsen OAS Shipping AS)


The PNG® solution utilizes pressurized containers that can be combined in small or

large configurations. It is a flexible solution that can be tailor-made to optimize a

value chain. The smallest PNG® vessel proposed by Knutsen has a CNG cargo

capacity corresponding to between 70 and 5 days production for the quantities of

associated gas production considered for this report.

2.6. Trans Ocean Gas

Trans Ocean Gas Inc. (TOG) is a natural gas transportation technology development

company. It is a privately owned company, composed of a team of Oil & Gas

industry experts, located in Newfoundland, Canada.

TOG owns the patent rights to storing and transporting compressed natural gas by

road, rail and sea in Fiber Reinforced Plastic (FRP) pressure vessels.

2.6.1. Technology

Initially developed for road and train transport, the TOG Inc cylinder, named Type-

4, has a laminate shell made by winding high-strength carbon fiber around HDPE

liner. The corrosion resistant HPDE liner provides a high level of safety over steel

systems when natural gas contains corrosive contaminants. It is complemented by a

corrosion resistant stainless steel port boss at both ends.

For the marine transport of large volumes of natural gas, TOG Inc proposes a

laminate shell made of high-density polyethylene (same as for the liner) wrapped

with continuous lengths of high-strength fibreglass. According to TOG Inc, the

pressure vessels will weigh significantly more than the carbon fiber wrapped

cylinder, but the cost to produce it will be approximately fifty percent lower.

48

Figure 31 Prototype 1-Meter Diameter Pressure Vessel (Courtesy TOG Inc.)

The TOG Inc pressure vessel is designed to withstand 750 barg pressure. Using a

factor of safety of 3.0, the allowable operating pressure will be 250 barg. It can also

withstand operating temperatures from -40°C to +40 °C .


The TOG Inc ship-based concept is designed to easily convert a container ship into a

gas carrier. Two types of containers combination, (which, under United Nations

(UN) guidelines, is defined as a multi-element gas container or MEGC), are

proposed by TOG Inc:

2.6.2.1. THE 40-FT ISO SHIPPING CONTAINER MEGC

It consists of eight large diameter (0.5m) pressure vessels secured inside an insulated

40-foot shipping container. The MEGC will carry 255 MMscf of Lean gas as given

in §1.1 at 250 barg and 25°C. Should the gas be loaded at -30°C, then the gas cargo

would increase to 355 MMscf, but the possible loading temperature is highly

dependant on the gas composition due to the high pressure. For instance, the Rich

gas as given in §1.1 would require a minimum temperature of 22°C to remain in

dense gas conditions. At 25°C, the Rich gas cargo would be 268 MMscf.

The tare weight (empty) of the shipping container and pressure vessels is about

16,000 kg.

49

Figure 32 Standard ISO container design - (Courtesy TOG Inc.)

2.6.2.2. THE MODULAR CASSETTES SYSTEM

The containment system is fabricated in modular cassettes for ease of installation

and hook-up. Steel truss frames are used to vertically house and contain a number of

FRP cylinders in each cassette. Cassettes frame are stacked several frames high to

form a gas containment module.

The cylinders are connected with duplex steel manifolds on both the top and bottom

of each cassette.

According to TOG Inc., the cassette system allows for 100% visual inspection while

in service and the removal of condensed natural gas liquids during the voyage.

Based on the arrangement illustrated below, the cylinders would have a diameter of

1 m and a length of about 5 m. The gas cargo capacities are the same as for the 40-ft

MEGC.

Figure 33 Modular Steel Frame (Courtesy TOG Inc.)

50

Figure 34 Ship contemplated concept (Courtesy TOG Inc.)

While TOG Inc. has not developed a real ship concept, it is contemplating installing

the MEGC modules or 40ft-containers on a barge, or on a retrofitted container ship.

No information is provided on the way the pressurized gas will be handled at both

loading and delivery points.


A summary of TOG Inc. MEGC system is given below compared with the same





respectively 250 barg and 25°C and -30°C.

51


(MMscf)

Cargo/Container

weight ratio

(ton/ton)

Energy ratio

LNG/CNG

(btu/btu)

TOG Inc. MEGC FRP pressure vessels

mounted in a 40-ft

ISO shipping

container (8

cylinders)

0.255@25°C

0.355@-30°

0.34

0.47

2

1.4

TOG Modular

cassettes

8 FRP pressure

vessels vertically

mounted in a

supporting frame

0.255@25°C

0.355@-30°

0.34

0.47

2

1.4

Table 8: TOG Inc. MEGC system


ABS awarded approval in principle (AIP) to the Trans Ocean Gas concept in

September 2003.

Trans Ocean Gas Inc. was seeking financial support to launch the certification of its

TOG Inc MEGC with its type-4 containers (2010). No more information is available

for the present report.


None.


According to Trans Ocean Gas Inc., some of the applications that potential

customers have indicated as a use for the TOG MEGC are listed below:

The transport of stranded natural gas from an offshore marine location,

The transport of stranded gas from a pipeline-restricted gas well,

The transport of associate gas where flaring is restricted,

The transport of natural gas from the production testing of a new well.


The modular concept with cassettes or 40ft-shipping container might be applicable

to the range of production rates considered in this report.

A major effort was made for the development of the MEGC, but integration in a

complete CNG transportation chain has still to be undertaken. These include

facilities for loading and delivery, the connection between cassettes, modules and

main loading headers on the ship itself whichwould require careful consideration.

52

2.7. Marine CNG – Comparison of technologies

While some proponents, Sea NG CoselleTM and EnerSea VOTRANSTM and to some

degree CETech, appear to be advanced in the definition of their overall system,

including loading and offloading operations, the others still need to develop fully

integrated systems.

The main characteristics of the different technology providers are summarised in the

following table.

53

CETech EnerSea VOTRANSTM Sea NG Corporation

CoselleTM

TransCanada CNG

Technologies

Knutsen OAS Shipping TOG

Type of Containment Composite or X80 pipe

steel ; composite (Iso

container)

X80 steel cylinders coiled X70 line pipe

forming a carrousel

(CoselleTM)

Composite reinforced

steel Gas Transport

Modules (GTM)

X80 steel cargo tank

cylinders (CTC)

Composite HDPE and fibreglass

cylinders (MEGC)

Containment

arrangement

Vertical or horizontal

pipes or ISO container

Vertical tank modules or

horizontal pipes

CosellesTM in holds of

bulk carrier

GTM stacked layers Vertically stacked

CTC’s

Shipping container or modular

cassettes with vertical cylinders

Gas pressure (barg) 150 – 250 125 200-266 206 250 250

Transport temperature

(°C)

-30 / ambient -30/0 ambient ambient ambient -30 / ambient

Cargo /Container weight

ratio

0.70 (composite)

0.24 (X80)

0.52 (container)

0.35-0.39 0.12-0.18

1.5 0.21 0.34-0.47

Development status concept stage advanced concept stage advanced concept stage concept stage concept stage Concept stage for MEGC

container only

Safety Aframax & Suezmax

with gas cylinders on

deck

ship’s holds under

nitrogen inerting

ship’s holds under

nitrogen inerting – leak

impact limited by coil

diameter

no information provided no information provided no information provided

Ship transport capacity

(MMscf)

85-319 (+ 60 to 120,000

m³oil)

200 – 1,200

variable (container)

75 – 1,000 (ship)

10-100 (barge)

51 -531 (ship)

?-80 (barge)

12-100

<1,600 (hypothetical)

70-1,200 variable as function of number of

containers

Targeted market

(MMsfd / nautical

miles)

49-275 / 300 -2,000 150-650/250-3,000

(ship)

10-100/50-750 (barge)

55-328/300-1,500 10-200/ <500 100-500/100-3,000

Operability (1) +/- full chain (except

multi container solution)

full chain full chain containment concept

only

full chain containment concept only

Applicability to

associated gas

(1 to 15 MMscf)

Possible (combined

oil/gas or containers)

Possible (barge) n.a. (ship)

possible (barge)

Possible Possible Possible

Operability means that the solution of the technology provider may cover the whole CNG transportation chain including ship configuration, gas treatment, loading and offloading operations.

Table 9 Marine CNG comparison

54

2.8. Elements of Costs

2.8.1. CNG transportation costs

Costs found in the literature are generally related to daily transported volume far

beyond the production rate of 1-15 MMscf/d considered in this study.

Based on the information published between 2002 and 2013, mainly from SeaNG

Coselle (C16 class carrier) VOTRANSTM and Knutsen, a consolidated unit cost per

MMBtu was calculated (2014 updated) for marine CNG transportation as a function

of transported volumes and travel distances.

The unit price includes the cost of the loading and offloading facilities whether

located on the ship or at source and delivery locations.

Figure 35 Cost of CNG transportation as function of daily volume production and distances (nautical

miles)

55

Figure 36: Marine CNG transportation costs vs distance to market

37 Figure Impact of facilities on total cost

As shown on the above graph, the costs of facilities may vary depending on the

project particulars (type of ship, jetty or buoy,..). They represent on average 12-22%

of the total cost which is higher than the percentage claimed by the technology

proponents (10-15%) but for larger volumes.

56

2.8.2. Gas treatment costs

Due to the nature of associated gases, one may expect that the gas will have to be

treated/conditioned prior to loading. An additional unit cost should therefore be

considered for the gas treatment units which would comprise:

An H2S removal,

A dehydration and CO2 adsorption unit,

A hydrocarbon dew point control unit.

Figure 38 Cost of associated gas treatment as function of daily volume of production

Figure 39 Capital Expenditure of the gas treatment as function of daily volume of production

0

0.2

0.4

0.6

0.8

1

1.2

0 2 4 6 8 10 12 14 16 18Tota

l Un

it C

ost

[U

SD/M

MB

TU]

Volume [MMscf/d]

Total Unit Cost Pre Treatment Unit [GTU]

0

5

10

15

20

25

0 2 4 6 8 10 12 14 16

CA

PEX

GTU

[M

USD

]

Volume [MMscf/d]

CAPEX Gas Pre treatment Unit [GTU]

57

If we neglect the scenarios involving long transportation distances which lead to

prohibitive unit costs, the unit price of gas delivered as CNG, including the normally

required pre- treatment, would range between 5-6 USD per MMBtu for low

volumes and 3-3.5 USD per MMBtu for volumes close to 15 MMscf/d.

2.9. Conclusions for marine CNG

This report addresses the possibility to recover gases associated with offshore oil

fields and to transport them under pressurized compressed gas form (CNG) to

potential customers. It specifically addresses gas volumes of production ranging

between 1 and 15 MMscf/d.

The various marine CNG systems developed in the 2000’s were designed for gas

volumes much higher than those considered for this study. The capital cost of the

ship being by far the major determinant of the project's profitability, the current

proposed designs here do not match the range of produced volumes. In simple terms,

the ships are too big. This issue has already been raised in 2009 by the Centre for

Marine CNG in a paper prepared for the Offshore Technology Conference

(OTC 20145).

The proposed barge systems are questionable as they were not really developed by

the technology providers. The SeaNG’s smallest C16 class carrier would be

underutilized while it could be a solution for the upper limit of the production range.

However, the combined oil and gas Aframax design, proposed by CETech, offers

interesting possibilities as combining a crude oil cargo with the CNG helps reduce

the otherwise high unit cost. Furthermore, gas is stored in horizontal pipes on the

ship’s deck is an advantage from a safety point of view (leakage, regular

inspection...) and would also remove the costfor nitrogen consumption.

As a conclusion, one may say that marine CNG for small volumes of associated

gases is at the limit of economic viability. Viability must be determined on a case by

case basis, and depends mainly on the ship or barge design, transportation distance

and volume, and also the need for and level of pre-treatment required at the source

location.

3. STATUS OF CNG TECHNOLOGIES – ON-SHORE CNG

3.1. Background

On-shore CNG is a proven gas transport technology that has been around for

decades. Natural Gas has seen an expanding interest in all parts of the world

(Europe, North- and South-America, Asia) mainly driven by environmental concerns

and to a lesser extent by the evolution of fuel costs including taxes. Natural gas has

an increasing role in transportation especially in urban areas for community fleet

vehicles like buses or refuse collection trucks where, compared to petroleum fuels,

natural gas contributes to cleaner and healthier ambient air.

58

Additionally, many rural areas are unlikely ever to receive pipeline gas because the

relatively few customers do not justify the costs of extending the pipelines to these

locations. Therefore several companies have developed CNG systems that will

compress natural gas so it can be loaded onto trucks and delivered to those industrial

and commercial customers without access to pipelines, creating what is called “a

virtual pipeline”.

The CNG system consists of:

natural gas compression and truck loading facilities at the source location,

truck offloading, heating, pressure letdown and metering facilities at the

customer site.

The main technical constraints in bulk CNG transportation are:

the weight of the containers, which impacts the operational cost,

the filling operation which should ideally proceed quickly, but which induces

high temperature due to the compression of the gas; high temperatures limit the

pressure and therefore fill capacity of the container with a negative effect on the

logistical costs (more trucks).

In most onshore CNG ventures, natural gas is usually withdrawn from an existing

gas pipeline. In CNG transportation at pressures ranging between 200 and 250 barg,

the gas must be further dried to prevent potential issues for condensation, hydrate

formation and freezing which can occur during filling and offloading operations.

In the case of associated gas, as for marine CNG, gas treatment and conditioning

will be necessary to ensure a safe and reliable carriage of the gas under high

pressure.

59

3.2. Road bulk CNG transportation

Various CNG bulk transport systems are used by energy companies promoting

virtual pipelines associated with clean fuel usage.

3.2.1. Steel tube trailers

The high pressure containment systems were first constructed of bundles of steel

cylinders and, later on, made of higher strength steels for deliveries of compressed

industrial gases (hydrogen, helium...). The cylinders are mounted on a trailer or

chassis.

Figure 40 Super Jumbo Tube Trailer (Courtesy FIBA technologies Inc.)

Their capacity is limited due to the weight of the steel cylinders and the road weight

limitations (commonly 40-42 tons for such trailers).

The latest generation are Jumbo and Super Jumbo tube trailers capable of carrying

respectively 160-180,000 and 260-290,000 scf of natural gas at around 185 barg.

3.2.2. GTM Type III cylinders module

Figure 41 Five Pod unit (Courtesy Luxfer-GTM Technologies)

60

Luxfer-GTM Technologies has designed a complete line of GTMs for the storage

and transportation of CNG. Constituted of an aluminum inner wall wrapped with

carbon fiberglass resin, the cylinders, much lighter than the traditional steel

cylinders, can be placed in scalable frames which are “manifolded” together. The

frames can then be mounted on truck beds or inserted into 10 ft pods, or 20 ft. and

40 ft long ISO shipping containers. These containers can then be transported on

truck chasses. A five pod unit has a transportation capacity of 439,000 scf (12,488

m3) of CNG

3.2.3. Lincoln TITANTM 4 composite cylinders

Developed by Hexagon Lincoln, the design of the TITANTM gas cylinder is based

upon Lincoln Composites' TUFFSHELL® technology. It has a HDPE liner, a

filament wound carbon fibre/epoxy composite shell plus a polyurethane coating

applied to the outer surface. The composite cylinders weigh 75 percent less than

equivalent steel tubes.

The TITANTM4 Module is a 40 ft ISO 1,496 certified shipping container which

contains four TITAN cylinders. Each cylinder is almost 12 m in length and over 1 m

in diameter and is designed to operate at 250 barg. In these conditions, one module

can contain 7 to 8 000 kg of CNG or about 360,000 scf with a module tare weight of

15,649 kg.

Figure 42 TITANTM4 Module (Courtesy Hexagon Lincoln)

3.2.4. Galileo Virtual Pipeline®

Figure 43 PAD platforms and MAT® gas storage modules (Courtesy Galileo)

The Galileo Virtual Pipeline® consists of a complete operational CNG chain based

on a transport and storage module named MAT® that includes:

http://www.lincolncomposites.com/

61

1) Modular CNG compression stations, placed on specially designed platforms

(PAC) or provided on a skid, that compress the gas up to 250 barg into

transport and storage modules,

2) MAT® modules are used for storing and transporting CNG on a trailer,

specially designed with an easy-to-operate exchange racking system to

load/unload modules,

3) PAD platforms are designed with a simple connection system to minimize both

loading and unloading times,

4) At the delivery location, a pressure regulating plant (PRP) including heating

system, filtration and metering, can be provided to meet the required delivery

pressure and temperature conditions.

Figure 44 Galileo MAT® gas transport module (Courtesy Verdek)

The transport and storage module MAT® consists of several ISO 9809 steel

cylinders manifolded together and mounted in a box designed, together with ST

racking system, for facilitating the handling, filling and offloading operations at both

ends of the virtual pipeline.

One MAT® module contains 34 or 39 cylinders each of 150 litres hydraulic capacity.

It can store 44,000 to 55,000 scf of natural gas at a pressure between 200 and

250 barg.

Galileo has developed three models of transport systems respectively with two, three

and four MAT’s, with a maximum transport capacity of 200,000 to 250,000 scf at

250 barg.

62

3.2.5. Comparison of CNG transport and storage containers

Summarised in the following table are the main characteristics of the CNG

containment type for trailers (“+” is more favourable, “-” is less favourable):

Tube type Luxfer-GTM

type III

Lincoln type

IV

Galileo MAT

Container

material

Steel – High

strength steel

Aluminum inner

wall wrapped

with carbon

fiberglass

Carbon

fibre/epoxy

composite

ISO 9809

steel cylinder

Trailer max

capacity

(MMscf)

up to 0.29 up to 0.44 up to 0.36 up to 0.25

Pressure (barg) 187-227 248 250 200-250

Corrosion

resistance

- ? ++ -

Gas/container

weight ratio (t/t)

0.24 0.41 0.79 0.2

Comparative

cost

base case ++ ++ +

Table 10: Comparison CNG containment type for trailers

The effective capacity highly depends on:

the gas composition including the possible contaminants (corrosion),

the loading conditions (fast fill or slow fill, cold gas filling) are also linked to the

containment material and its capability to dissipate the heat of compression

(plastic liners do not dissipate heat as efficiently as steel),

the residual quantity of gas (hauling efficiency) prior to being returned for

refilling.

All these elements may significantly impact the capacity of the delivery chain.


High-way tube trailers have been used since the 1950’s for deliveries of compressed

industrial gases. Later designs, with the introduction of light weight composite

material or use of higher strength steels, allowed higher filling pressures and higher

cargo volumes while remaining within permissible weights loads on highways.

However, the transport weight restriction in practically all countries dramatically

limits the weight of the tractor, trailer and payload. The following table gives for the

theoretical maximum trailer capacity along with the number of trucks to be loaded

per day for a number of associated gas production rates.

63

1 MMscf/d

Trailer type Tube trailer Luxfer-GTM Lincoln

TITAN

Galileo

Capacity (scf) 290,000 440,000 360,000 250,000

Nbr to load/day 4 3 3 4

5 MMscf/d


TITAN

Galileo

Capacity (scf) 290,000 440,000 360,000 250,000


10 MMscf/d


TITAN

Galileo

Capacity (scf) 290,000 440,000 360,000 250,000


15 MMscf/d


TITAN

Galileo

Capacity (scf) 290,000 440,000 360,000 250,000


Table 11: Comparison for different production rates

Export of gas by truck is not sustainable, not only due to the huge truck traffic

required, but also the size of loading and offloading facilities that would need to be

put in place.

Gas composition and presence of contaminants have a direct impact on the facilities

costs at the oil field location.

3.2.7. Elements of Cost

3.2.7.1. CNG TRANSPORTATION COSTS (CAPEX)

The Total Unit Cost estimation is mainly based on information retrieved for

Galileo’s ‘Virtual Pipeline’ system. The Total Cost (Capex) is composed of the

Facility Cost and the Transport Cost.

The Facility Cost includes the loading compression station, the unloading station

and the recompression (to the required user or pipeline pressure) facility. The

Transport Cost includes the container (MAT module), the support (VST module)

and the truck.

64

The cost evolution is a function of the number of trucks, transport modules and gas

handling facilities according to the increased distances and volumes with the

following assumptions:

Distance 1 truck route 250 miles / day

Container Capacity (MAT) 60,000 scf

Truck transport capacity

(four MAT)

240,000 scf

Max loading/offloading time 6h

Payback period 10 years

Table 12: Cost estimation assumption

On this basis, the unit prices per transported MMBTU were calculated as a function

of the travelled distances and the required volume of gas to be exported from the

field. The results are illustrated by the following graphs:

Figure 45 CNG transportation - Unit Prices for 250 to 500 miles

5.075.085.09

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Figure 46 CNG transportation - Unit Prices for 500 to 750 miles

Figure 47 CNG transportation - Unit Prices for 750 to 1,000 miles

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66

Figure 48CNG land transport unit cost vs distance to market

3.2.7.2. OPERATING COSTS

The above delivery costs are given as an example for the specific Galileo

technology. These costs depend on the type of transportation system (tube trailer or

others). In that respect, it is interesting to compare the fuel consumption of the

various types of CNG transport by truck. The following graphs give an idea of the

fuel consumption for the lower and upper ends of the considered export range,

knowing that, in general, fuel equates to about 30% of total operating costs of the

truck fleet.

2.83.23.6

44.44.85.25.6

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67

Figure 49 Fuel consumption for CNG transport of 1MMscf as function of trailer type

Figure 50 Fuel consumption for CNG transport of 15MMscf as function of trailer type

3.2.7.3. GAS TREATMENT COSTS

Due to the nature of associated gases, one may expect that the gas will have to be

processed/conditioned prior to loading. An additional unit cost should therefore be

considered for the gas treatment units which comprise:

A hydrogen sulphide removal unit,

A dehydration and CO2 adsorption unit,

A hydrocarbon dew point control unit.

68

Figure 51 Cost of associated gas treatment as function of daily volume of production

Figure 52 Capital Expenditure of the gas treatment as function of daily volume of production

3.3. Conclusions for on-shore CNG

It is now economically viable to utilize high capacity CNG trailers to transport

natural gas to areas unreached by pipeline supply, but only for relatively small

volumes of gas.

In the context of this report, CNG transportation by truck reaches its practical limit

when the volume of associated gas to be exported exceed about 5 MMscf/d.

69

In simple terms, in contrast to the comment made about the size of CNG ships being

too large, the trucks are too small.

For volumes lower than about 5 MMscf/d and distances shorter than about 500 miles

the total unit cost is around 5 USD/MMBtu. For longer distances, the cost and

complexity of transportation as CNG becomes prohibitive.

4. ALTERNATIVE SYSTEMS FOR NATURAL GAS

TRANSPORTATION

4.1. Transport as natural gas hydrates (NGH)

The transport of natural gas in a hydrate form is attractive as the gas is transported in

a solid state at moderate pressure and negative temperature. The negative storage

temperature is maintained by active cooling.

The principle for a hydrate based natural gas transportation system is:

To produce hydrate pellets

To transport the pellets

To dissociated the pellets and recover the natural gas

The production of hydrate pellets is based on mixing natural gas and water under

appropriate operating conditions. The mixture is then worked to form pellets. The

pellets are then cooled prior to be stored. The energy needs to produce hydrate

pellets are similar to liquefaction process.

A key issue during transport is to control the pressure and temperature conditions of

the storage such that the hydrates stay in their solid form while optimizing energy

consumption. Energy needs for transport are similar to CNG and are significantly

higher than LNG as the volume of hydrates is about 4 times the volume of LNG for

the same amount of gas.

At the reception facilities, the hydrates are dissociated by heat exchange with sea

water. The gas is compressed and fed into the pipeline network after drying, which

is energy intensive as dissociation takes place at close to atmospheric pressure.

It is to be noted that hydrates dissociation is not straightforward as the rate of

dissociation varies significantly along the process. It is to be noted the natural gas

composition influences the rate of dissociation.

4.2. Pressurized LNG (PLNG)

LNG liquefies, and remains liquid, at a higher temperature when kept under

pressure. The PLNG concept utilizes pressure to increase the storage temperature of

the liquefied gas. Liquefaction of LNG requires considerable pre-treatment and has

large power requirements, and pressurizing the LNG brings significant reduction of

these requirements. The power required for liquefying the gas would be around 60

% of that required for conventional LNG. Also the limits on CO2 and heavy

hydrocarbon content are less severe than for conventional LNG liquefaction.

70

The concept has been developed by ExxonMobil, is still at the conceptual stage, and

its economic viability is yet to be demonstrated.

The optimal PLNG conditions for transportation were identified as follows

compared to LNG and CNG:

LNG PLNG CNG

Pressure (barg) 1 17 200-250

Temperature (°C) -160 -110 25

Cargo density (kg/m³) 440 350 188-223

Table 13: PLNG conditions for transportation

Figure 53 Conceptual 200,000 m³ PLNG ship design (Courtesy ExxonMobil)

The potential benefits of PLNG should therefore come from a significant reduction

in LNG export facilities: footprint, facilities, gas treating units… and also in the

receiving terminals. However, application of PLNG for natural gas transportation

would require a whole new delivery chain: liquefaction plants, PLNG carriers,

PLNG storage vessels, PLNG receiving and regasification facilities..

4.3. Adsorbed natural gas (ANG)

In recent years, there have been attempts to store natural gas under adsorptive form

especially to increase the autonomy of natural gas vehicles. ANG is based on the

property of solid material to adsorb gas molecules. Activated charcoal, for example,

has a very large surface area because of its porous nature. This gives it the ability to

adsorb large quantities of natural gas at relatively low pressures compared to CNG.

Several operational issues must be addressed for ANG:

significant heat is generated during adsorption, and desorption of the gas required

heating. The heat conductivity of the adsorbent material is therefore important,

high performance carbons have higher densities, and a compromise must be

found between the weight of the adsorbent and its capacity to store gas,

71

storing and delivering the gas implies cyclic operations that, over time, have

detrimental effects on the storage capacity and mechanical resistance of the

adsorbent (attrition);

the ANG storage is depressurized at nearly the atmospheric pressure in order to

maximize the net storage capacity with as consequence that a discharge

compressor be needed to achieve the required delivery pressure.

gas composition may be a serious issue as heavier hydrocarbon molecules are

large compared to methane and may not be so readily adsorbed,

the presence of contaminant, even in small quantities in the feed gas, can

accumulate preferentially on the adsorbent.

The viability of this method for large transportation capacities is questionable, but it

may provide substantial benefits as containers for vehicles or cooking applications.

72

5. CNG MARKET IN USA

5.1. CNG as fuel for vehicles

From the early 1990s, compressed natural gas (CNG) fuelling infrastructure

experienced a rapid development in USA. The 1992 Energy Policy Act, which

sought to increase clean energy use and to improve overall energy efficiency,

marked the first governmental incentive for traditional fuelled vehicle users to

switch to alternative fuelled vehicles. It gave the US Department of Energy the

power to determinate the minimum light duty alternative fuel vehicles share required

in Federal fleets. By 1999, 75% of vehicles acquired by the Federal Government

were required to be alternatively fuelled.

In 1995, the Natural Gas Vehicle (NGV) Industry Strategy, issued by the National

Gas Vehicle Coalition, Gas Research Institute and American Gas Association, was

developed to set a unified vision of the market industry and to boost the use of

natural gas in transportation. In order to set a strategy, the industry stakeholders first

defined their areas of action as shown in the following figure.

Figure 54 Source: NGV Industry Strategy, 1995

As part of the strategy to develop the NGV marketplace, the NGV Industry Strategy

set the following key goals:

To position NGVs to compete on an economic basis (reducing life cycle costs

and taking advantages of governmental programs),

To penetrate high fuel use fleet applications,

To ensure availability of vehicle and fuel facilities, products and services in

order to satisfy the demand,

To deploy public open access and private onsite fuelling facilities when

appropriate (transit agencies, refuse trucks, delivery fleets among others).

73

The NGV Industry Strategy working group developed actions to pursue these key

objectives and achieved a significant growth of the industry in the period 1992-

1995.

As part of the industry approach, local NG distribution companies became involved

in marketing to secure a bigger share in the marketplace, and also got closer to the

main manufacturing associations in order to promote more evolved NGV

equipment. Furthermore, these distribution companies begin to use NGV technology

in their own fleets, requiring large quantities of fuel. As the typical CNG stations in

USA at that time were not able to provide those volumes, a significant effort was

required to design and implement adequate fuelling infrastructure sized for these

fleets.

The promotion of CNG was encouraged in spite of the decline in local gas

production and the growth of natural gas imports by pipeline and vessel (LNG).

While CNG has remained cheaper than diesel or gasoline, until recently the gap

between them was not sufficient to justify the investment in vehicle conversion to

CNG. Fleet managers rather chose flex-fuel ethanol vehicles over NGV due to their

convenience and minimal conversion cost, resulting in significant growth of ethanol

fuelled vehicles in the USA as illustrated below.

Figure 55 Energy Policy Act Vehicle Acquisition history - Source: Alternative Fuels Data Center

NGV supply infrastructure expanded until 1997 then, deflecting the preference for

flex-fuelled ethanol vehicles, declined to a low of 721 stations in 2007. Investment

then began to increase again at a moderate pace until 2011 (47 new stations per year

on average), and more aggressively later (177 new stations per year on average) as

shown in the graph below.

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Figure 56 NGV Fuelling Stations History - Source: Alternative Fuels Data Center, DOE & NGV

Journal

This recent expansion (2008 - 2014) is explained by plateau or minor increasing of

NG prices (as a result of the unconventional natural gas boom) against the large

raise of diesel and gasoline prices and a severe excise duty increase on ethanol in

2011, which made it economically less attractive.

Figure 57 USA´s Average Retail Fuel Prices- Source: Alternative Fuels Data Center

The NGV infrastructure business faces a significant conundrum. To grow demand

requires investment in infrastructure, but the cost of CNG stations is quite high and

achieving the required volume of sales to deliver an economic return is often slow,

thus discourage investment in the infrastructure. Several industry stakeholders have

been calling for governmental measures to mitigate the impact of these competing

factors that impede market growth.

Nonetheless, NGV fuel supply has been steadily increasing as shown in the graph

below. However, the market remains very small (90 MMscf/d in 2014), taking into

account the potential of the country.

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Figure 58 Natural Gas Vehicle Fuel Supply- Source: US Energy Information Administration

In 2014, USA had almost 1,500 CNG operational filling stations across the country,

with160 stations planned to be built in the near future. California ranked top in the

list of states with 286 CNG stations, followed by New York, Oklahoma, Texas and

Utah, which have about 100 stations each.

In terms of access, the share of the CNG filling stations is 33% private (i.e. tied to

supplying a specific vehicle fleet), 54% public and 13% addressed to private-

government fleets. The graph shows the number of stations by access in 2015.

Figure 59 CNG Filling Stations by Access - Source: Alternative Fuels Data Center

While the market is open to new players (according to US Energy Information

Administration 120 companies were operational in 2013), just 3 of them represent

74% of the NGV market: Southern California Gas Company (37%), Clean Energy

(28%) and Pacific Gas and Electric Company (9%).

Southern California Gas Company currently serves 20 million customers (residential

and NGV supply). The company has more than 100 public CNG stations in the state

and also promotes a home refuelling appliance.

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Clean Energy is focused on NG for transportation. The company owns its stations

and also manufactures, sells and installs NG station components to its clients. Its

nationwide network relies on 500 NG fuelling stations (LNG for heavy duty and

CNG for light and medium duty vehicles).

Pacific Gas and Electric Co. (PG&E) provides natural gas and energy to 16 million

customers in California. Based on data from the US Department of Energy, its fleet

operation is one of the nation´s largest for a public utility, and includes 3,400

alternative fuelled vehicles (natural gas, hybrid and electric) 1. The company also

owns 32 private CNG and LNG fuelling stations2.

With regard to demand, the number of CNG vehicles has followed the same pattern

as that of the NG stations, with a decline over the period 2002-2010 followed by a

recovery after 2011.

Figure 60 CNG Vehicles in Use - Source: Consultant based on Alternative Fuels Data Center & NGV

Journal

Even though demand and supply have been following a similar pattern, the USA´s

average supply per station is below that of other countries. This means that the

growth in the number of stations has outstripped demand and stations are, on

average, underutilized.

1 http://www1.eere.energy.gov/cleancities/pacific_gas.htm

2 http://www.pgecurrents.com/2014/01/13/fleetowner-magazine-tabs-pge-as-top-vocational-fleet/

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77

Figure 61 Average Supply by Station for Selected Countries (2014) - Source: NGV Journal statistics

5.2. Flaring gas utilization experiences

CNG and LNG use has not had a significant impact in reducing gas flaring in the

USA. Based on the 2012 update of the National Development and Reform

Commission (NDRC) Natural Gas Utilization Policy only 0.1% of the current flared

gas could be reduced by these technologies. Recently however, a number of new

developments have raised interest in using CNG to reduce flaring.

General Electric & Statoil have developed a low-cost prototype to capture flared

natural gas in the Bakken field in North Dakota. The system, “CNG in a box”,

consists of process equipment to remove the natural gas liquids (butane and

propane) for petrochemical uses, the remaining methane (CNG) being used to power

dual fuel engines on converted drilling rigs, replacing 40% of the diesel normally

used. Statoil estimates that more than 60 MMMscf, 5% of currently flared gas, could

be saved (used and reducing emissions) every day if the pilot project is replicated in

all rigs operating in the Bakken field. Currently Statoil is proposing to convert the

fracturing equipment and light truck fleet in the Bakken to CNG fuel using gas

currently flared.

Finally, Mobile Fuel Solution (MFS) recently announced implementation of ‘virtual

pipelines’ consisting of CNG trucked from oil fields to consumption areas in New

York. The trucks are designed with 2 pods of gas cylinders holding the equivalent of

715 gallons of gasoline. The virtual pipelines are intended to supply NG fuelled

vehicles in areas with no access to the gas grid. MFS will launch the first virtual

pipeline in February 2015 with the beverage industry's distribution fleet among the

first customers, and a refuse collection fleet and the Environment Remediation

Department as other potential users. Long Island will act as the main station of from

which the system of mobile stations will be provided. MFS will launch a second

virtual pipeline in July 2015 which main station would be at Orangetown, located in

the north of New York State.

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78

5.3. CNG as fuel for vessels

The first attempts to ship CNG by sea date back to the 1960s. The Columbia Gas

Company developed a CNG containment system on board a converted ship, the

“MV Sigalpha”, with a 1.3 MMscf capacity. The ship made a dozen successful trips

(around New York Harbor). However, the operations ceased due to the high capital

cost of the ship technology.

Figure 62 MV Sigalpha- Source: Centre for Marine CNG

However, marine CNG has been identified as a niche technology that could

complement LNG and pipeline technologies for stranded gas monetization. As a

result, in the last decades several less expensive CNG transportation technologies

have been developed.

It is important to note that one of the major benefits of CNG transportation over

LNG technology is the small fixed capital asset: there is no requirement of

liquefaction and regasification terminals and the main asset is transportable (the

CNG vessel). Consequently, depending on gas supply agreements, seasonality

and/or life of field, the ship can be relocated. According to a study carried out by

Wood Mackenzie, a CNG supply chain costs a quarter of a LNG chain, based on

equivalent gas volume.

Figure 63 Breakdown of investments in LNG and CNG marine supply chains- Source: Consultant

based on Wood Mackenzie

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79

6. CNG MARKET IN CHINA

China´s concerns about environmental issues and securing energy requirements for

the future have triggered an official policy to pursue a rapid rise in natural gas use.

As it was mentioned in the LNG Report, the 2010 five-year development plan called

for the share of natural gas in the total primary energy matrix to be increased from

5% in 2011 to 8% by 2015. To achieve the objective, the Government applied a

number of measures to promote the use of gas.

At the end of 1980s, the first CNG filling stations came online in China, specially

addressing taxis and light commercial vehicles. But the most populous country in

the world made a significant deployment of CNG five years ago, when cities, such

as Beijing, Chengdu and Hong Kong, converted buses and taxis to CNG in an effort

to reduce notoriously toxic urban air pollution. Currently, it is estimated that there

are almost 3 million NG fuelled vehicles on the road, six times as many as just five

years ago, when deployment of NGVs took off.

Figure 64 NG (CNG and LNG) vehicles in China- Source: NGV Journal

Driven by energy security and urban air quality concerns, Beijing, the capital of

China, has made concerted efforts to increase the use of natural gas economy-wide,

especially in transportation. Based on the 2012 update of the National Development

and Reform Commission (NDRC) Natural Gas Utilization Policy, NGV have been

deemed a priority use of natural gas over power generation and the chemical

industry. As a result, a domestic industry has been developed to supply NGV

equipment and infrastructure, with state-owned enterprises taking the lead to expand

this market.

Several cities, such as Chongqing, Urumqi, Xi’an, Lanzhou, Xining, have a natural

gas transportation and distribution system through a pipeline grid. In these cases,

95% of the taxis and inter-city buses are CNG fuelled.

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Large disparities exist among cities in terms of natural gas use. Mega cities like

Beijing, Shanghai, Chongqing and Chengdu began to promote natural gas use in the

public transportation system (mainly in buses and taxis) in the late 1990s. After

more than 10 years of development, these cities have become mature systems and

several lessons have been learned from their experience. Medium and small sized

cities are following the trend by exploring the application of natural gas, firstly in

public transport and later in private motor vehicles. Dongguan is a good example.

Dongguan, a medium sized city, located in the south of Guangdong Province, has

been plagued by acid rain for years. In 2006, the municipality began to encourage

agreements between natural gas providers and interested taxi car owners to initiate

mixed fuel taxi retrofits. In order to further promote natural gas application in public

transport, the municipality published The Implementation Plan of Natural Gas

Vehicle Fuelling Project Promotion in Dongguan in 2008. As an encouragement

measure, the Plan offered subsidies for refuelling stations, buses and taxis that

would convert from oil to gas technology over the period 2008-2010. The Plan also

set out the expansion goals for the following years.

81

Goals / Year 2007 2008 2009 2010 By 2015

#CNG Refueling Stations

2 5 10 15 60

#CNG Taxis 100 800 2,800 4,800 >90%

#CNG Buses 100 500 1,000 >90%

Figure 65 Expansion Plan goals - Source: Implementation Plan of Natural Gas Vehicle Fuelling Project

Promotion in Dongguan

Selected long distance bus terminals and urban bus stations were encouraged to

participate in the CNG transformation in Dongguan. Measures were taken to

accelerate conversion of traditional vehicles to CNG/mixed fuel, including setting

time schedules for CNG bus purchases, refusing licenses to non-converted buses,

and introducing charges to taxis that exceeded limit emission level. The Plan also

required CNG refuelling station locations to be consistent with the overall urban

development plan and compliant with industry standards.

Dongguan is a successful case in terms of natural gas promotion but, the application

is still struggling with several issues: regulation and supervision of pricing and

quality of service in a market where there is no competition. In conclusion, medium

and small sized cities might take into consideration Dongguan experience, planning

and lessons, in an attempt to apply a successful natural gas program.

The Chinese NGV manufacturing industry is growing quickly. There are more than

60 NGV vehicle manufacturers in the country, and production of components for

NGV filling stations (pressure reducers, electronic control units and gas nozzles) is

increasing. China has developed its own purification facilities, storage facilities,

compressors and dispensers for stations and this equipment meets 90%, sometimes

even 100%, of the domestic market. Locally-developed vehicles and facilities reduce

the cost of vehicles and stations. Nevertheless, the scale of production is

comparatively small, since many manufacturers produce only small volumes. It

should be noted that, as well as passenger cars, minibuses, and light-duty trucks,

Chinese light duty NGVs include motorcycle, CNG or bi-fuel rickshaws, and bi-fuel

tricycles for disabled persons.

In order to support a nationwide transition toward increased NG fuelled vehicles, the

government faces an important challenge: to supply gas for the rapidly increasing

number of natural gas fuelled vehicles. Public and private operators of NGV stations

realize the need of expanding the refuelling supply capacity all over the country.

Even in countries with well-developed gas pipeline infrastructure, there are locations

that are not reached by the grid, and mother/daughter stations can play a key role

ensuring access to CNG. However, the system presents some restrictions: while

daughter stations are well-suited for light duty CNG vehicles, they may offer design

and operational challenges for heavy duty CNG vehicles.

The economic incentive to switch to CNG in China is not as strong as in USA,

mainly explained to higher gas prices, the government support is stronger than North

America.

82

The main lesson of China CNG policy is that government action - through state-

owned enterprises investments - can be effective to achieve a sustainable scale,

breaking the vicious circle produced by the coordination problem in the market.

7. CNG MARKET IN PAKISTAN

Pakistan is ranked as the 6th most populated country in the world with 185 million

people in 2014. Taking in view its growth rate of 9% during the last 30 years, it is

expected its population will reach around 250 million people in 2025. Even if the

urban population of the country is almost 37%, far lower than the five most

populated countries of the list, Pakistan is in the 10th top ranking position of urban

population. In other words, Pakistan has been and will be dealing with pollution

issues in the main cities.

The natural gas story in Pakistan started in 1952, with the discovery of gas field at

Sui in Balochistan. The initial consumers were the power generation industry, widen

later to other industries and residential and commercial sectors.

Taking into account the lack of domestic fuels and the already deployed

infrastructure network for transmission and distribution (pipeline grid), the

Government of Pakistan identified domestic natural gas, particularly CNG, as an

adequate alternative fuel for vehicles. Even if the first CNG stations were

implemented by the Hydrocarbon Development Institute of Pakistan (HDIP) in

Karachi 1982 and Islamabad in 1989, the Petroleum Policies launched in 1992, 1995

and 1998 set the framework for the CNG promotion. The main objectives of these

policies were to decrease imports of gasoline and diesel oil and to improve

environmental conditions in the cities. Promulgation of CNG safety rules, approval

of infrastructure required and a number of incentives to private investors set the

beginning of a CNG era. As part of these incentives, the Government of Pakistan

established a liberal approval to obtain licenses for CNG retailing, a free market

consumer price of CNG, natural gas tariff linked to petrol price, priority of natural

gas connection to CNG stations and exemption of import duty and sales tax for CNG

station and vehicle conversion equipment. Unlike some other countries, the

promotion of the CNG industry in Pakistan did not set a direct subsidy. Even more,

power and CNG sectors pay proportionally higher prices to cross-subsidize the

fertilizer and residential sectors. Furthermore, the 1998 policy announced a 2 year

target of establishing 150 CNG stations and converting 100,000 vehicles.

By middle of 2000s the replacement of gasoline vehicles by CNG technology was a

very successful. However, imported diesel oil still represented a significant bill for

the Government and the air pollution was very severe. The small gap price between

gas (as it is shown in the figure 61) and diesel and the high conversion cost were not

attractive enough to encourage the sought conversion. As part of the promotion the

Government of Pakistan launched programs to gradually phase out diesel buses in

the major cities of the country and increase CNG fuelled vehicles.

83

Figure 66 Evolution of Retail Fuel Prices in Pakistan - Source: Development of natural gas as a

vehicular fuel in Pakistan: Issues and prospects

Over the following years, the CNG market increased rapidly. In the period 2000-

2010 the number of CNG stations has increased from 150 to 3,331, while the

number of vehicles running on CNG has risen from 120,000 to 2,740,000. Based on

Statistics and Europe (2013) the country has 3.1 million vehicles running on CNG,

which represents almost 90% of the cars of the country3. Based on International

Association of Natural Gas Vehicles Statistics (IANGV) Pakistan has the second

largest CNG vehicles fleet in the world, second only to Iran.

Figure 67 Evolution of NGVs in Pakistan - Source: Development of natural gas as a vehicular fuel in

Pakistan: Issues and prospects

3 Medium-Term Market Report 2013 - International Energy Agency (EIA).

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Figure 68 Evolution of CNG Filling Stations in Pakistan - Source: Development of natural gas as a

vehicular fuel in Pakistan: Issues and prospects

Regarding demand, in the period 2000 – 2010 the CNG industry consumption has

been raising at a rate of 11% annually, reaching currently 325 MMscf/d, which

represents 9% of the production of gas in Pakistan. In the following figure is

exposed the evolution of fuels share in the sector.

Figure 69 Evolution of Fuel consumption by transport sector in Pakistan - Source: Development of

natural gas as a vehicular fuel in Pakistan: Issues and prospects

The energy crisis that the country is suffering has led to natural gas shortages (due to

the decrease in indigenous gas reserves and production since 2008, as it is shown in

the Figure 65, which are affecting some key sectors of the Pakistani economy such

as power generation and industry (fertilizers, cement and textile among others).

Consequently, the Pakistan’s economy has been shrinking proportionately, dropping

from a GDP growth of 6.8% in 2007 to a GDP growth of 1.6% in 2010. However,

last two years growth has been increasing reaching 4.4% in 2013 due to a faster than

expected manufacturing sector recovery.

0

500

1000

1500

2000

2500

3000

3500

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G F

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atio

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The Pakistan government launched a plan in 2010 looking to step down the natural

gas demand for transportation use. The plan included “the gas holidays”, where gas

supply to CNG stations is cut off for several days in the week, an imposed ban on

import of CNG conversion kids and cylinders. Recently, restrictions to several OEM

companies to stop conversion of CNG vehicles were implemented, without previous

negotiation, leading to an incipient tension between the Government and

stakeholders.

Figure 70 Evolution of Gas Production and Consumption by sector in Pakistan - Source: Energy Year

Book (EYB), Hydrocarbon Development Institute of Pakistan (HDIP)

Pakistan is currently looking at a number of alternatives to solve its natural gas

shortage. Based on the State Bank of Pakistan, if gas well-head prices were properly

formulated and gas companies were run strictly on a commercial basis, will force to

a more efficient use of the gas, prioritizing industrial and generation sector over

CNG and household. In this scenario the following implications are foreseen:

1. “Existing gas fields that are commercial unviable would automatically come

on-line, which could increase Pakistan’s gas production quite significantly;

2. Competitive well-head gas prices would also encourage fresh exploration,

which could increase total gas reserves in the country;

3. Although the cost of gas production would automatically increase, we think

more reflective pricing would incentivize more efficient usage.”

There are also two LNG import projects under study: Floating Regasification and

Storage Unit (FSRU) at Port Qasim and a second FSRU near Karachi. With the

arrival of LNG in the country, the Pakistan government expects to reduce the petrol

consumption by almost two billion litres per annum and recover the industry and

CNG as fuel which has suffered natural gas restrictions over the last 4 years.

However, progress has been very slow and it is uncertain whether their plans will

materialise over the medium term.

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8. APPLICATIONS FOR OTHER COUNTRIES

8.1. Opportunities for small scale CNG

Currently, there are several transportation technologies vying to monetize natural

gas. In order to design an efficient project, it is very important to determine the best

technology in each case. There are two main parameters to take into consideration:

the volume to supply and the distance to transport the resource. According to the

SBC Energy Institute, the most economic technologies with regard to distance and

volume (order of magnitude) are shown in the following graph.

Figure 71 Options to monetize natural gas- Source: Introduction to Natural Gas –SBC Energy

Institute

According to this very broad-brush analysis, CNG is primarily competing with

pipeline gas. CNG is attractive up to 2,000 km and 5-6 Bcm/year (equivalent to 175

- 210 Bcf/y), while for short distances and larger volumes, a pipeline is typically

more attractive than CNG. For larger volumes and distances, LNG or GTL are

preferred options.

Regarding flaring reduction, several investment projects are in development to

minimize and, thus, monetize the produced associated gas being flared. These

projects can be classified into three major groups, namely: export oriented (LNG),

domestic oriented (60% used for power generation) and field utilization (Gas lift, re-

injection and natural gas as fuel for field uses).

The monetization of natural gas has not been a business option for major and

marginal oil field companies. It was perceived as an unwanted by-product of crude

oil production and natural gas flare off was not a problem for oil and gas managers.

In recent years, only export-oriented large-scale LNG projects were considered a

good prospect to monetize flared gas.

Nowadays, the situation is slowly beginning to change. Alternatives to monetize

natural gas in the domestic market are gaining momentum. The small-scale use of

CNG is currently considered a business strategy to produce benefits for firms and

utility services consumers. Among other profits, it might reduce natural gas flaring

(economical inefficiency and environmental pollution) and develop a nationwide

local market for natural gas utilization.

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Probably, new technologies such as “CNG in a Box” can be applied to flaring sites,

not only by strictly economic reasons but also environmental issues.

8.2. Nigeria

The small-scale use of CNG is slowly progressing in power generation,

transportation and industrial sectors in Nigeria.

It must be considered that environmental problems linked to climate change, such as

gas flaring, make Nigeria very vulnerable. This problem, plus the increasing value

for money of the natural gas business provides room for cost-effective small scale

CNG projects. It was underlined by the Minister of Petroleum Resources Mrs.

Diezani Alison-Madueke while citing examples from the country’s oil industry

experience on environmental issues called on global operators of the oil and gas

industry to re-strategize on sustainable policies for the sector in a Conference

organized by the James Baker Institute for Public Policy Rice University in

December 2014. The Minister assured that Nigeria is leveraging the Clean

Development Mechanism (CDM) to access funds for major projects. She emphasize

the gas flaring problem and the environmental degradation in the Niger Delta

wrought by the activities of major International Oil Companies operating in Nigeria

and moves by government to outlaw gas flaring.

The main issue in Nigeria is not the supply of natural gas, but an inadequate gas

transmission and distribution infrastructure, and a low level of industrialization

hampering development of potential anchor demand. Domestic demand is only

about 400 MMscf/d, which is very low considering the large population.

However, several sectors could be potential “anchor” demands for CNG, such as:

“peak’ power generation (especially for “peaker” plants), small isolated power

generation for industries, electric power for marginal fields and transport.

8.2.1. CNG as fuel for power generation

The Island Power Project, a Public Private Partnership (PPP) between Lagos State

Government (LASG) and Island Power Limited (IPL), currently supplies electricity

generated using CNG supplied gas to several hospitals, judicial buildings,

commercial buildings and shops, and public lighting installations on 22 Streets on

Lagos Island. The reliability of power supply was drastically improved from 35% to

99.4%. The project was executed in 9 months and is considered one of the most

successful Independent Power Projects in Nigeria.

The objective of the second stage of the project is to increase the generation capacity

of the power plant from 10MW to 114MW using natural gas supplied by pipeline to

supply power to Lagos Island central business district.

These examples show the room for business opportunities based on CNG solutions

fuelling power stations in Nigeria. According to the Petroleum Gas University of

Ploiesti, in particular the east part of the country, especially Port Harcourt, has a

great potential for CNG technology, and it should be exploited.

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Gas Network Services Limited (GNSL) has installed a CNG mother station (CMS)

facility on the Ilasamaja on Oshodi-Apapa express way in Lagos State that supplies

customers in the Lagos and surroundings areas that are not reached by the grid. This

CMS facility was designed for an initial output capacity of 5.25 MMscf/d at a

discharge pressure of 250 barg. CNG is loaded into mobile tube trailers for onward

delivery to daughter stations customer locations, and will serve customers within a

200km radius. The facility has also dispensing points for filling Natural Gas

Vehicles (NGVs). Gas supply to the CMS comes from a service line that taps into an

existing Gaslink Nigeria Limited pipeline along the Oshodi-Apapa Express Way.

8.2.2. Small scale power generation for isolated industries

The reliable power demand of isolated industries (not connected to the grid) is

encouraging small-scale CNG projects in Nigeria. Typical industries using CNG are

steel, aluminium, fertilizer/agriculture, cement and glass.

Nestlé Nigeria Plc. pioneered the use of CNG as a fuel source for its Flowergate

factory, reducing electricity costs by 30%. The choice for CNG hinged on the fact

that, aside from being a reliable fuel source of power generation, it is highly cost

effective and clean. As for the Island Power Project described in the section above,

the use of CNG at this factory is expected to be a transition solution while a gas

pipeline is built.

Oil and Gas companies are also active in providing CNG solutions. Shell Petroleum

Development Company of Nigeria Limited (SPDC) provides CNG as fuel for

several isolated industries and power generation facilities over a 100 km radius in

the Niger Delta.

Substitution of expensive fuels by CNG is also a developing option. GE created a 60

km ‘virtual pipeline’ (2 trucks deliveries a day) to provide gas for industrial

activities substituting diesel by CNG in Sagamu (Ogun state, Nigeria) in 2012. The

substitution resulted in a 45% reduction in fuel costs.

8.2.3. CNG as fuel for transport

The use of CNG for transportation provides the opportunity to reduce emissions

from flaring and, at the same time, to diminish emissions from their own

transportation energy use. Additionally, there is a persistent gap between supply and

demand of gasoline.

However, adoption of CNG as a transportation fuel has been a slow process. CNG as

vehicular fuel was first proposed in Nigeria in 1997 with 25 vehicles converted to

run on natural gas. In 2013, there were still only 2,210 NGV and 8 refuelling

stations (Ogunlowo, 2014).

It can be argued that some policy instruments can be used for promoting natural gas

vehicles in Nigeria: government action - through state-owned enterprises

investments (as in China) and availability of inexpensive gas to this market (as in

USA).

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Regardless of what is the best set of governmental policies, some private companies

are doing business in the CNG market at Nigeria. For instance, IMW Industries

(Clean Energy Compression Corp.) and Borkir International Co. Ltd. (member of

the Dangote Group of Companies) have announced the development of CNG fueling

stations in Nigeria, beginning in the first quarter of 2013. The Dangote Group has

approximately 5,000 trucks in their own fleets to convert to CNG and will also be

supporting CNG fuelling and conversions. They have a CNG truck conversion

facility in Ileka, Lagos state.

8.2.4. Natural Gas from Marginal fields

In 2003, the Federal Government of Nigeria awarded twenty-four (24) marginal

fields to indigenous companies for exploitation. These marginal fields featured : low

reserves of crude oil (less than 20 million stock tank barrels of crude oil), low crude

oil daily production rates (expected or producing less than 4,000 stb/day), 8-15 years

economic life, low to moderate net present values (NPVs), and low natural gas

reserves (less than 100 Bscf: AG and NAG) .

Many marginal fields are using less than one percent of their produced associated

natural gas. Therefore, small-scale CNG solutions appear to be an alternative to

monetize natural gas, to enhance the economic performance of these marginal fields

and achieve an effective gas flare reduction with subsequent environmental benefits.

An example is Lekoil’s plan for

the Otakikpo field in OML 11,

located near the coast in the

Niger Delta, Lekoil plans to use

the associated gas for its plant

utility, plant power generation

and external electrical power

supply to the immediate

community. Surplus associated

gas will be offered to a third

party at the battery limit (p. 53,

Chandler et al., 2014).

Source: Lekoil.

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It is expected that projects such as Lekoil´s or the USA´s “CNG in a box” could be

replicated in other marginal fields of Nigeria.

8.3. Iraq

Iraq has the 12th largest natural gas reserves in the world; however NG use in the

primary energy mix is quite insignificant (1%). Furthermore, in 2011, the country

flared 7.5% of the world total. Thus, the country´s picture offers an interesting

opportunity to reduce flaring and monetize the produced associated gas.

Different technologies could be used to achieve this objective: LNG, CNG amongst

others. Nevertheless, Iraq has not yet made significant steps in this direction and

opportunities identified below may need a natural gas market to be a developed prior

to introducing even small scale CNG projects.


The lack of fuel for power generation is a nationwide issue in Iraq. However,

Kurdistan seems to be addressing this issue in a more efficient way than the rest of

the country. According to Dana Gas, which is currently the main provider of natural

gas to the power generation sector, Kurdistan had only two hours of electricity per

day in 2007. By 2008, the Company (in partnership with Crescent Petroleum)

launched the production, compression and delivery of natural gas from the northern

fields of Khor Mor and Chemchemal to supply the two power plants in the area:

Erbil and Chemchemal. The facility consists of two brand new gas processing and

LPG extraction plants, which have a combined capacity of 270 MMscf/d and an

enhancement production facility to increase the production to 330 MMscf/d. The gas

production is shipped by a 180 km pipeline to the power plants (2,000MW), which

represent 2/3 of Kurdistan generation capacity in 2013. In conclusion, KRG has

already tripled its 2015 target for gas fired power generation one year earlier. It is

important to note that LPG experiences could be a preliminary stage to CNG

development in small power generation plants.

Based on the Belfer Center for Science and International Affairs of Harvard

Kennedy School, in Kurdistan the power generation system, gas fuelled, supplies

twenty hours of the day, however in the rest of Iraq, the population suffers frequent

and severe power outages that can last for almost an entire day.

Regarding the national picture, according to the expert Khaled Abubarkr, political

instability is the major constraint for monetizing gas reserves in the country, since

any investment in this field requires certain stability on the political and regulatory

framework.

Besides, “any future decision to export gas without domestic demand being fully

satisfied will likely be met by strong public opposition”. In other words, the

development of the natural gas market would be possible only if the Government

send clear signs of stability, and, the project has the following order: first, to supply

the local market, and then, to export the rest of the resource.

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This scheme seems to be in line with the Dana Gas business plan in Kurdistan,

which affirmed that the company will address its gas production to export, “after

fulfilling the gas demand in the local market”. In fact, the company plans to export

to Europe through the Turkey pipeline 350 billion cubic feet (Bcf) by 2020 -2025.

The rest of Iraq, which is one step behind, has a promising path to move along if the

supply of local demand is kept as a priority. The oil production growth, destined to

export, will continue to increase gas flaring; of which monetization will be a key

factor in the development of the domestic gas market.

As already identified, the knowledge and experience acquired in Iraq in the gas field

could leave room in the future for CNG developments, and furthermore small scale

CNG projects. As observed in the Chinese and USA´s markets, a learning curve is

necessary to succeed in the small scale developments.

8.3.2. CNG as fuel for transportation

The 270 km Iraq – Iran pipeline was completed in 2014 to export 875 MMscf/d

from Iran to Iraq, starting with 245 MMscf/d; however, the inauguration of the

pipeline has been suffering delays due to unrest in Iraq. The main goal of the

pipeline is to supply the Al Mansoureh power plant; nevertheless, Iranian private

companies, which run the project in venture with the state owned company, have

been commissioned to build the first ten CNG stations in Iraq. Their construction

will begin as soon as the pipeline becomes operational.

Transportation is a growing market in Iraq. The average motorization rate in 2010,

100 vehicles per 1,000 inhabitants (Kurdistan being the region with the highest rate),

was quite high compared to countries like India or China. Furthermore, it is

expected this rate will grow in the future driven by the high GDP growth

perspectives: 175 vehicles per 1,000 inhabitants by 2020 and 200 vehicles per 1,000

inhabitants by 2035.

Taken into consideration that Iran has a developed and mature market of CNG (Iran

has the largest CNG utilising fleet in the world with 3 million vehicles) and the

promising growth of private fleets in Iraq, the implementation of Iranian CNG

stations could be the first step of a new market in Iraq. Private Iranian firms

experience in CNG, National Oil Companies as “market makers”, could provide the

required knowledge to give birth to the CNG market in Iraq.

8.3.3. CNG as fuel for industries

North Oil Company (NOC) is a state owned company which operates oil and gas

fields in the north of Iraq (from Baghdad governorate to Nineveh and Erbil

governorates). NOC offers separation and compression of associated gas process, in

order to supply the North Gas Company (NGC). The major share of this processed

gas is the industrial sector, which use it as fuel. This company might be a key driver

to develop CNG solutions for industries and public power plants in Iraq.

In Kurdistan, according to Dana Gas, a Gas City Project, which consists in the

supply of an industrial zone and several residential and commercial areas, was being

studied in 2014. The implementation of this project is the next challenge for the

company, which aims to open the gas market to new local users.

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8.3.4. CNG as fuel for military sector

Iraq´s military sector has a significant demand of traditional fuel which could be

replaced by natural gas use. However, according to the Assistant Secretary of

Defense for Operational Energy Plans and Programs, the conversion from traditional

fuel to natural gas by its bases would present several inconveniences for the USA

tactical fleet. Main reasons are availability, compatibility and energy density. Firstly,

in regard of availability, the USA forces need to rely on a source which can be

globally sourced and distributed, and natural gas does not respond to this

requirement. Secondly, regarding compatibility, natural gas vehicles need a

particular technology engine, which requires an investment in infrastructure and

engine adaptation. Finally, in terms of energy density, natural gas vehicles have

significant less autonomy than gasoline or diesel vehicles (due to the size of the

storage tank), which is a key factor in the military sector. Currently, USA has not

considered CNG for its military bases in Iraq; however its further appreciation on

this point could be interesting.

It is important to note that all these barriers only apply to operational fleet in the

bases, which is the 75% of the bases energy demand. The other 25%, which is

explained by domestic installations, could have less constraint to make the

conversion to natural gas fuel. Since the military bases are spread all over the

country, the grid does not reach all of them, and according to the required demand

volume, an infrastructure investment would not be cost effective. In those cases

small scale CNG technology could be a solution worthwhile of a study.

8.4. Indonesia

Indonesia is a seismically active archipelago with more than 17,000 islands, making

pipeline and interconnecting transmission power system very complex. Gas

transportation facilities and power transmission infrastructure is mostly located in

Java and North Sumatra, while they remain almost non-existent in the other islands.

According to the country's economic projected growth and the government´s goal to

minimize dependency on oil, the expansion of domestic gas utilization (transported

by new technologies) might be an answer. This application may provide also a

cleaner and cheaper alternative fuel for electricity generation.

Indonesia has the 14th gas reserves in the world, spread in several fields (Natuna,

South Sumatra, East Kalimantan and Tangguh Papua). A large share of these gas

resources are committed to long term supply agreements with other countries

(through LNG liquefaction terminals).


Considering that natural gas is a large energy source (even if it is dispersed) and the

domestic natural gas distribution infrastructure is deficient to satisfy current and

future demand, Indonesia has a strong interest in developing alternative technology

solutions.

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Perusahaan Listrik Negara, State Electricity Company (PLN) considers CNG marine

transportation as one of the most adequate options. Unlike pipelines and LNG

projects, the great majority of CNG project capital is re-deployable to other

applications if needed, providing a useful risk management solution in case

unexpected events occur in the supply chain, including reservoir, market,

commercial and political risks. Furthermore, projects are easily scalable by adding

vessels. Loading and unloading plants are low capital intense.

PLN is currently carrying out a pilot stage project, which consists of shipping gas

from Gresik facilities to a receiving point located in Lombok (about 300 nautical

miles from Gresik) via CNG carrier. Two power plant (60 MW) would be fuelled in

order to cover electricity peak demand. The carrier, which will be the world’s first

compressed natural gas, will be built by China to fulfil the order from Pelayaran

Bahtera Adhiguna, a subsidiary of PLN. The ship design has 110 meters length, 14

knots speed and a nominal capacity of 77 MMscf. The CNG carrier is valued at 200

million USD, being the most expensive asset in the supply chain, and it is expected

to be delivered in May 2016.

Figure 72 Gresik and Lombok locations- Source: Consultant based on Google Earth

Marine CNG would allow using cheaper natural gas instead of liquid fuel for power

generation. If the pilot project succeeds, marine CNG technology would be applied

to other power plants across the country, shown in the graph, with similar capacities.

Figure 73 Power Plans Location in Indonesia- Source: Enipedia

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Furthermore, particularly for peak demand, it is necessary to provide a large power

swing for a short period of time (6 hours a day). This energy could be supplied by

complementary small thermal power plants which could be fed either by diesel, fuel-

oil or natural gas.

Another example of power generation supply by CNG is Maxpower´s project, which

recently launched the first marine CNG-fuelled power plant. The project, located in

Bintan island, took two months to be completed and consists of supplying two

power plants (Type 6) by CNG transported via virtual pipeline (barge or truck). The

alternative solution represented fuel savings of 35% to Maxpower and an investment

of 4 MMUSD. This small scale CNG solution could be replicated by other power

generators, who are currently using gasoline or diesel in the country.

8.4.2. CNG as fuel for transportation

Indonesia has been interested on developing natural gas use in transportation for

more than a decade. The main reasons of the Ministry of Energy´s fuel

diversification were to reduce oil fuel dependency and to face the rising air pollution

in the cities.

Based on PT. Raja Rafa Samudra, Indonesia launched the first NGV program called

“Blue Sky Program” at the end of 1980s, which consisted in the implementation of

30 CNG stations across the country (driven by Petramina, Indonesia’s state owned

Oil & Gas Company). The program failed due to lack of incentives for users (fuel

was subsided) and high costs of operating stations. Later, in 2005, the private sector

increased their investments in NGV and industrial CNG business. This time the

Government supported the initiative with new NGV policies (2007-2011). In

addition, the Government boosted the deployment of CNG Stations through the

implementation of the regulation 64/2012 on Supply, Distribution and Pricing of

Gas for Transport. As a result, in 2012 Petramina launched the first CNG station.

Ministry of Industry and Mineral Resources are currently working on new incentives

to CNG use.

Regarding the supply, Envogas (CNG subsidiary of Petramina) and several private

companies offer CNG supply across the country. Based on Pertamina, the company

had 13 CNG stations deployed along Java and Sumatra in 2014, and it has targeted

to build 150 CNG stations annually for 5 years, starting in 2015. This plan includes

extending the supply to other islands, such as Balikpapan and Sengkang. Also, the

private sector has several CNG stations deployed in Java and Sumatra. Several of

these stations are on the grid area, thus, are supplied by the pipeline network;

however, many of them, called “daughter” stations are supplied by virtual pipeline

(trucks) from “mother” stations. Based on the Association Perusahaan CNG

Indonesia (APCNGI) there were 22 CNG mother stations established (plus 5

planned) and 6 daughter stations among its member companies in 2012.

According to NGV Global, in 2015, PT Pertamina and PGN signed a memorandum

of understanding (MOU) in order to cooperate to facilitate natural gas to refuelling

stations. PGN has already identified 73 fuel stations in Greater Jakarta, which

intersect the gas pipeline network and, as a result, could be converted to multi fuel

suppliers (LNG/CNG).

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Regarding the demand, the conversion to NGV by users depends on 2 main factors:

a perdurable gap between petrol and gas prices (which is hindered by current

subsidies on gasoline and diesel fuels) and a spread availability of CNG filling

stations. Recently, the Ministry of Transportation launched a program to promote

the CNG use. According to manufacture experts this policy remains unclear and

needs time to have significant impact.

8.4.3. Experience of Jakarta

Jakarta implemented a pilot project in 1980s, which consisted of installing CNG

converter kits in 200 local taxis. The project failed due to the lack of availability of

supply. This issue was explained by the gap of oil and gas prices, which did not

incentivise the private sector to invest in CNG stations.

In 2007, Jakarta retook the conversion plan, and started a transition of local

government fleet and public transportation vehicles to CNG technology. According

to International Council on Clean Transportation, Jakarta Transportation Agency has

committed to a full conversion of three-wheeled taxis by the end of 2016, and

TransJakarta BRT system, which operates 600 CNG buses, has plans to introduce a

1,000 more. Finally, DKI Jakarta will add 3,000 CNG powered mini buses.

Regarding the supply, the city had 8 CNG stations in 2012 and had ambitious plans

to quadruple the number. However, the expectations are not being met, since only 6

stations were operational from the 10 built in 2014. In addition, Jakarta Department

of Industry and Energy and a recent MOU between Jakarta Propertindo and

TransJakarta announced to build 50 and 20 new stations, respectively.

As it can be noted, Indonesia has decided to progress with the NGV technology and,

taking into consideration the geography of the country (an archipelago with deficient

gas transportation network), a significant growth of mother/daughter stations is

expected in the following years, in order to comply with targets. In this case, trucks

and vessels carriers would be developed to supply the rest of the islands. It is

important to note than Jakarta´s stimulus in the NGV field is a main driver for

Indonesia´s progress on NGV developments.

8.4.4. CNG as fuel for industrial sector

CNG has a potential market in the industrial sector, which had contracted 13

MMscf/d from mother stations supply in North Java by 2012.

According to CNG-NGV Forum, the industrial sector, and especially the mining

sector, would be economically benefited by the conversion of conventional fuel to

CNG. The transportation proposed to these areas is by pipeline or virtual network

(trucks) in the cases which are not reached by the grid. Several mining companies in

Sumatra and Kalimantan islands have already switched to CNG/LNG fuel in order

to reduce their fuel costs.

Based on the success of these experiences, several industrial clusters could

implement the conversion of oil to gas fuel in order to make significant savings.

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9. POTENTIAL BARRIERS AND INCENTIVES

It has been found that the development of CNG is slowed down by several barriers

such as:

“The coordination problem” for investment decisions (in terms of infrastructure

development).

The minimum required scale (demand/ supply) in order to assure economic

viability.

The prices that the demand is willing to pay for the new equipment.

Besides those facing these experiences, there are other countries which have been

developing interesting and successful projects with CNG technology. Some of these

practices should be taken into account in future CNG developments in order to

capitalize on the already acquired knowledge related to the field. In this regard, a

study of Yeh (2007) has underlined the following policies4:

Demand side market creation programs: mandatory conversion of government

fleets and urban buses procurement.

supply side market creation programs: governmental investments in refueling

stations, pipelines and conversion kits.

financial incentive programs offered to consumers and equipment suppliers:

subsidies and tax breaks to reduce prices of natural gas specifically for

transportation, rebates and loans to lower or eliminate consumers’ vehicle

conversion costs, exemptions from import duties and the lowering or elimination

of import tariffs on machinery, equipment, and kits, and exemption from sales

taxes for the construction and operation of refueling stations.

Regulation-based policy: industry standards, regulations, and certification

programs; liberal licensing for CNG retailing; expedited approvals for the

installation of CNG refueling stations; forced early retirement of old fleet

vehicles, city buses, and taxis; penalties for operating city buses on ‘‘dirty’’ fuels

such as diesel; and traffic restrictions for which NGVs are exempt.

Information - or coalition - type policies: government/industry/non-governmental

organization (NGO) coalitions and government-funded research and

development programs.

Interactions between stakeholder groups, such as incentives provided by

equipment suppliers to consumers: the voucher scheme developed in New

Zealand.

10. CONCLUSIONS

CNG is an already proved technology and it has been boosted in several aspects

since the 1990s.

4 Yeh, Sonia (2007), “An empirical analysis on the adoption of alternative fuel vehicles: The case of natural gas

vehicles”, Energy Policy 35, pp. 5865–5875.

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There are economic and environmental reasons to develop CNG in the different

countries. Regarding the economic aspect, CNG technology is a cost effective

solution to supply gas to areas which are not reached by the grid and do not reach

the minimum required volume to invest in a traditional infrastructure.

Regarding the environmental aspect, crucial in several cities for instance in China,

emission reduction policies are the main factor to develop this technology, aiming to

reduce gas flaring and also vehicular emissions.

The following projects are examples of the main small scale CNG solutions in

countries like USA and China.

In order to supply areas that are not reached by the grid, currently, there are several

projects being developed in USA, such as a virtual pipeline to supply NGV stations

by mother/daughter system in New York and “CNG in a box” in North Dakota to

fuel engines on drilling rigs. Also, it should be noted that CNG transportation

system by vessel has significant advantages over LNG (smaller fixed capital asset),

and the technology could be sturdily developed to monetize stranded gas. However,

it is necessary to design a convenient ship that supplies economic and technical

requirements.

Additionally, in China there has already been implemented a mother/daughter

system which has been successful.

Regarding the flared reduction, an oil company in USA is developing a low-cost

“CNG Box” in order to supply gas to engines in drilling rigs.

It is important to note that marine CNG transportation has some benefits compared

to LNG in terms of costs, due to its lower investment in fixed facilities

(regasification, liquefaction plants).

CNG development has to cope with several barriers that slow down its

popularization as the “coordination problem” or non-competitive prices. In order to

tackle these issues, tgovernment action by means of incentive programs has been

proven as an effective solution.

11. REFERENCES

A New Concept for CNG carriers & Floating CNG/Oil Processing a Storage

Offshore Platforms, R.Ramoo, M.Parthasarathy, (2011).

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Web-pages:

- http://www.cetech.no/

- http://enersea.com/

- http://www.coselle.com/

- https://verdek.com/pdf/GalileoCNG_VerdekPresentation.pdf

- http://knutsenoas.com/knutsen-technology/knutsen-compressed-natural-gas-

technology-png%C2%AE/

- http://www.hexagonlincoln.com/product-lines/titan

- www.thejakartapost.com

- www.ngvglobal.com

- www.livelifedrive.com

- www.irdiplomacy.ir/en

- www.noc.oil.gov.iq

- http://energy.defense.gov

- www.iraq-businessnews.com

- http://www.iran-daiyl.com/News

- www.oandoplc.com

- http://www.lekoil.com/index.php/otakikpo-marginal-field.html

- http://www.eenews.net/stories/1059983182

http://www.cetech.no/

http://enersea.com/

http://www.coselle.com/

https://verdek.com/pdf/GalileoCNG_VerdekPresentation.pdf

http://knutsenoas.com/knutsen-technology/knutsen-compressed-natural-gas-technology-png%C2%AE/

http://knutsenoas.com/knutsen-technology/knutsen-compressed-natural-gas-technology-png%C2%AE/

http://www.hexagonlincoln.com/product-lines/titan

http://www.oandoplc.com/

http://www.lekoil.com/index.php/otakikpo-marginal-field.html

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